Since the ASEAN-China free trade
agreement will reach a new stage by the end of 2012, Japanese companies have to
consider how to leverage the ASEAN production base to develop markets in China.
While China’s economy has slowed
in the wake of the European economic crisis, its growth rate for the whole year
is still expected to exceed 7 percent.
For the past 30 years, China’s
average economic growth rate has been 10 percent, and no other country has been
able to sustain such a high level of growth over such a long period of time.
China, which has become the
world’s second-largest economy, has begun to attract a lot of attention as a
“world marketplace” with its robust purchasing power in recent years.
China’s imports grew from $225.1
billion in 2000 to $1.74 trillion in 2011, a nearly eightfold expansion. The
size of China’s imports is second only to the United States.
Imports come from a diverse range
of countries, and the number of countries and regions with annual imports worth
more than $100 million has grown sharply from 65 in 2000 to 120 in 2011.
China’s imports from Japan
increased from $41.5 billion in 2000 to $194.6 billion in 2011, making Japan
China’s biggest importing country in term of value. Exports to China now play
an important part in ensuring Japan’s sustainable economic growth.
However, it needs to be noted
that Japan’s share of imports to China has fallen from 18.4 percent in 2000 to
11.2 percent in 2011.
Meanwhile, imports from
"ASEAN6"--Indonesia, Malaysia, the Philippines, Thailand, Singapore
and Vietnam--have grown from $21.9 billion in 2000 to $189.8 billion in 2011,
with their share rising from 9.7 percent to 10.9 percent.
In the January-June period,
imports from ASEAN6 were worth $92.9 billion on a preliminary basis, surpassing
Japan’s $88.3 billion. Japan remains China’s top importing country, but ASEAN6
has become the No. 1 importing region.
Import items from ASEAN6 used to
feature many raw materials, such as petrol and timber, but are now mainly
industrial products and their parts and components.
The top import item from ASEAN6
is integrated circuits. Second are computer-related products, including hard
disk drives, with semiconductor devices in seventh place and computer-related
parts in eighth place.
China is the world’s No. 1
exporter of computers, but many parts are imported from ASEAN6 due to
development of supply chains between China and ASEAN.
The No. 3 import item is natural
rubber, which is used as raw material for automobile tires, reflecting China’s
burgeoning car market. Palm oil comes sixth place, reflecting the growing
foodstuffs market in China.
Encouraged by high levels of
economic growth, China’s energy demand is growing, and China depends on imports
from ASEAN6 for many items, such as coal (fouth place), refined petroleum
products (fifth place), crude oil (11th place) and lignite (12th place).
Further, imports of petrochemical
products, such as cyclic hydrocarbons (13th place), ethylene polymers (14th
place) and acyclic alcohols (19th place), are increasing.
It is doubtless that many of
these industrial products come from the ASEAN factories of multinational
corporations, including Japanese companies.
Incidentally, Japanese
manufacturers’ outstanding direct investment in ASEAN6 was worth 5.3 trillion
yen at the end of 2011, exceeding 4.8 trillion yen from China.
Against this backdrop, the ASEAN-China
FTA is heading toward a new phase.
The agreement came into force in
2005, and tariffs have already been removed from 7,262 items, or 91.6 percent
of the total.
By the end of 2012, tariffs will
be removed from a further 232 items, 2.9 percent, while tariffs on the
remaining 429 items, 5.4 percent, are due to be reduced to 20 percent or less.
If the tariff removals and
reductions of the ASEAN-China FTA framework were to be applied to Japan-China
trade, some 91.4 percent of the import value from Japan would be tariff-free.
Of course, it would be
unrealistic to think that all of Japan’s exports to China could be replaced by
those from ASEAN.
But Japanese manufacturers own
large production facilities in ASEAN, an FTA among Japan, China and South Korea
will likely take some time to be concluded and effectuated, and salaries in
China are rising sharply.
Given these facts, the leveraging
of production facilities in ASEAN and the ASEAN-China FTA must surely be
considered as one extra possible strategy in developing and securing new
markets in China.
Keiichiro Oizumi
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Health care and Life Science with expertise in ASEAN 's area. We are currently changing the platform of www.yourvietnamexpert.com, if any request, please, contact directly Dr Christian SIODMAK, business strategist, owner and CEO of SBC at christian.siodmak@gmail.com. Many thanks.
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