Conclusions

There is now considerable evidence, as surveyed here, that PRC's recent rapid growth has generated substantial opportunities for trade and investment in regional partner economies. This rapid growth has sucked in large volumes of imports of both primary and manufactured goods that have compensated its neighbors for their losses of market share in the US and Japan. Even the concern over FDI diversion, which appeared an obvious 'threat' a few years ago, can be set aside on the basis of substantial empirical evidence. Central to the growth of intra-industry trade in the region has been the spread of global production networks either between units of the same firm or with independent contract manufacturers, who provide goods to the buyer’s specification. Hence final products made in PRC may contain parts and components from many different parts of the region with value-added at stages in a production chain that stretches across a number of countries. FDI has been a prime mover in this process in integrating PRC-based firms in these global networks and in developing the 'triangular trade' between PRC, the rest of East-South East Asia and the large markets in the US and Europe. In this emerging specialization its regional neighbors provide the inputs for manufactures from PRC, which are then exported out of the region. Currently this is proving strongly mutually beneficial.

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