General

According to a summary of foreign media reports, there was a slight year-on-year increase in global trade flow from January to February. In March, China's foreign trade also experienced a year-on-year rebound, with the total import and export value of international trade increasing by 15.5% year-on-year, driving a 4.8% increase in the total import and export value in the first quarter (calculated in RMB, the same below). In the above sense, the recovery of China's foreign trade may provide further assistance for the recovery and growth of global trade flows. It should be clarified that in the context of the post pandemic era, China, as the world's largest trading country, remains steadfast in its position on the international supply side. But the changes in the international trade pattern in East Asia are deepening.

This change is fully reflected in the changes in China's trade data in the first quarter. On the one hand, with the export growth rate reaching 8.4% in the first quarter, exports to ASEAN increased by 28%. On the other hand, China's exports to the European Union and the United States increased by 0.2% and decreased by 10.4%, respectively. This change has significantly demonstrated that China's international trade export market is achieving a new balance between developed and developing country markets. But on the other hand, it also implies a decline in demand from developed countries for China. The fluctuation of Sino US trade policies in the past few years, the United States proposed "friendly offshore outsourcing" and "nearshore outsourcing", and multinational companies adopted the "China+1" strategy to avoid risks. These factors led to the transfer of some industrial chains from Chinese Mainland to Southeast Asia. The increase in China's exports to ASEAN is due to the role of ASEAN as an intermediary in the industrial chain between China and the United States. The United States has increased its demand for ASEAN end products, while ASEAN requires a large number of intermediate products from China.

The traditional pattern of international trade in East Asia is that South Korea and Japan export high-end products, China exports low-end products, and the three countries simultaneously import a large number of bulk commodities and primary products. ASEAN's export products include bulk commodities and some primary products. But the pattern that has gradually formed since the 1980s is currently changing. The traditional trading powers of South Korea and Japan have had consecutive trade deficits since 2022. The reasons for this are both the contraction of the demand side in developed countries and the changes in international competition. High end products in China's export products, especially new energy vehicles and lithium batteries, have gained increasing competitive advantages in recent years, gradually achieving "overtaking on curves". The flagship products of South Korea and Japan's foreign exports, namely automobiles and ships, are no longer leading the way. And another flagship product, including digital products such as ICT, has gradually lost China, the most dynamic market, as it has had to join the United States in regulating high-tech products in China.

The strengthening of the coupling between China and ASEAN in international trade in recent years has elevated ASEAN's position in the value chain. In addition, China's influence in high-end products has greatly increased, and South Korea and Japan have a trend of marginalization. Although developed country markets have almost no restrictions on South Korea and Japan, the two countries must face and solve the trade deficit problem, otherwise their international competitiveness will be difficult to maintain. In this sense, in recent years, South Korea and Japan have become members of the Comprehensive and Progressive Trans Pacific Partnership (CPTPP), joined the Indo Pacific Economic Framework (IPEF), and sought more partners outside of China, which is not necessarily a path choice. But does facing China's constantly developing and mature market mean missing out on an important opportunity for East Asian economic integration?