The paper “ Impact of China on South East Asian Countries” is a worthy variant of the case study on macro & microeconomics. The rapid growth of China in recent decades has led to fear based on its impacts on southeast Asian countries (SEA). The country's economic impact on its neighbors has been of great importance. Most of the Southeast Asian nations are export-dependent. According to Shen & Chen (2010), it was thus expected that as these countries continued to prosper, they would be able to take part in value-added economic activities which are a preserve of countries with highly advanced infrastructure, educated labor force, and good governance.
The recent explosion of Chinese economic growth was seen by many that it was to cloud out the SEA countries in all areas of the economic ladder. There were still others who saw that Chinese economic growth would enable the South East Asian countries to prosper through trade (Shen & Chen, 2010). This research paper will look to establish whether Chinese economic growth has been of positive or negative impact on the Southeast Asian countries.
This will be done by establishing whether the theory of comparative advantage holds in this case. This is through determining whether China has displaced SEA countries in the export markets and also whether SEA has benefited from meeting the Chinese consumption needs. AnalysisLost export market shareThe Foreign Direct Investment (FDI) data have been portraying China to be taking the export market especially the USA from the South East Asian countries. This has been attributed to the competitive and diversion effect (Mctaggart, Findlay & Parkin, 2013). A lot of SEA countries' share in export trade have been diverted to China.
This has led to a situation where the Chinese export figures especially to the US being boosted while those for SEA are depressed. The availability of cheap labor in China has made a great impact on Foreign Direct Investment (FDI) in the region. Most of the companies have taken the advantage of cheap labor and outsources their production to China. This has led to vertical specialization which in some cases can give misleading figures on Chinese exports. There is high competition for the export market between China and SEA countries (Mukhopadhyay & Thomassin, 2010).
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