How ASEAN Became China’s Top Trading Partner

The world is changing. In 2020, ASEAN became China’s largest trading partner, surpassing both the EU and the US. In the first quarter of the year, the ASEAN-China trade increased by 6% to $140 billion, accounting for about 15% of China’s total trade volume. 

COVID-19 and the Trade War

This increase may be because both the EU and the US have been on lockdown, and trade tensions between the US and China continue to escalate. To offset the impact of the trade war, China is looking at its regional neighbors.

While trade with the EU and the US has slowed down, China’s imports from Indonesia and Vietnam increased by 13% and 24%. Electronics have been a significant contributor to the Q1 results, as China imported 25% more electronics from ASEAN compared to the previous year. The most sought-after electronics by Chinese importers were microprocessor chips, analog-to-digital converters, and chip capacitors. China imported almost $15 billion of these products from ASEAN and exported about $6 billion worth of electronics to ASEAN.

Another factor that increased trade relations between ASEAN and China are the Japanese and South Korean manufacturers who relocated their production facilities from China to ASEAN. The relocation might be because of the rising trade tensions, lower production costs, or to circumvent tariffs. These companies moved primarily to Malaysia, Vietnam, and Thailand and exported their products to China.

What does the future hold?

Despite these developments, the EU will likely regain its position as China’s top trading partner once the pandemic ends. Still, in a post-pandemic world, trade tensions between the West and China will remain a challenge, and Chinese companies will keep up their efforts to foster regional trade with their ASEAN neighbors. Thus, some of the shifts may be temporary, but some of them may also be long-term. Only time will tell. 

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