China's Integration in Asian Production Networks and its Implications

The paper analyses the rapid progress and the consequences of China's integration in Asian production networks. International processing activities, based on Asian inputs and mainly carried out by Asian affiliates have been the engine of China's trade expansion in the nineties. China's position in triangular trade, characterised by deficits with Asia in intermediate goods and surpluses with "Western" countries in final goods, is similar to that of ASEAN countries. But the size of China's economy carries the mechanisms of triangular trade to extremes, as China's exports are displacing those of other Asian economies in Western markets at an accelerated pace.