Changing Patterns of Trade and Global Value Chains in Postcrisis Asia
Sophisticated and geographically dispersed global value chains have emerged as an important feature of Asia’s economic success, particularly in East Asia.
This brief examines changing patterns of trade and global value chains (GVCs) in developing Asia, focusing on the period since the crisis. It analyzes the export slowdown in real terms and in relation to real GDP growth for the region and for major economies. It then attempts to explain the export slowdown. Finally, it considers emerging new trading opportunities in the region and policy suggestions.
- After decades of rapid growth, developing Asia’s exports have slowed in line with global trends since the global financial crisis. In volume terms, annual average export growth in developing Asia was 4.7% per year in 2011–2015 compared with 11.2% in 2001–2010. The export slowdown is also visible in relation to gross domestic product growth.
- The export slowdown in the region reflects a combination of weak import demand for Asian goods in advanced economy markets, structural transformation and reduced import demand in the People’s Republic of China (PRC), and the possible impact of increasing nontariff measures.
- It is overdone to speculate that this slowdown marks the end of the era of export-led growth in Asia.
- Much of the weak import demand from the advanced economy markets is likely to be temporary and partially reversed as their recovery gathers momentum. More proactive fiscal policy and structural reforms would help to sustain growth in advanced economies.
- The PRC is moving up in global value chains (GVCs), which implies the development of more technologically sophisticated regional value chains in East Asia that can propel a new phase of trade growth. Continuing reforms would enable market forces to play a more decisive role in the PRC economy.
- Some of the PRC’s labor-intensive GVC production stages are migrating to lower-cost locations in the region. Recipient economies should make greater efforts to improve their investment climate, implement reforms dealing with behind-the-border barriers, upgrade skills, enhance finance for small and medium-sized enterprises, and invest in trade-related infrastructure and digital infrastructure.
- Greater participation by small and medium-sized enterprises in GVCs and services (both commercial and digital services) are also potential engines of trade expansion in developing Asia.
- Developing Asia should continue to liberalize trade and resist protectionism.