Distancing From China Can Help ASEAN Supply Chain Recovery The Fastest
The current coronavirus crisis should be a clear warning to the Association of Southeast Asian Nations ASEAN that they must review their economic integration with China in terms of both scale and quality. For a joint recovery of the ASEAN region’s production chain it is paramount that they distance themselves from China. This is required not just for the Asia-Pacific economy but for the world economy to pull through this unprecedented economic disruption.
Data released by the Chinese General Administration of Customs showed that as of now the ASEAN have replaced the EU to become China’s largest trading partner in the first quarter of this year, with bilateral trade up 6.1 percent year-on-year to 991.34 billion yuan ($140.62 billion).
While at a first glance it may be comforting to see the positive increase in ASEAN trade with China even amid the coronavirus pandemic, it should sound an alarming bell. The reduction in demand from China has already reduced manufacturing activities in some ASEAN countries and this has naturally cast a shadow over future trade prospects. According to data from IHS Market, manufacturers in the seven monitored ASEAN countries were hit hard by the Wuhan pandemic in March. The ASEAN purchasing managers’ index (PMI) fell from 50.2 in February to 43.3 in March, with Singapore’s PMI slumping to 27.7 and Vietnam’s down to 41.9.
This indicates that the Southeast Asian supply chain centering around China coming into being is a very bad thing for, the regional economy. ASEAN dependence on China has reached an unprecedented level of unacceptable economic dependence. Such a relationship means that when the Chinese economy takes a hard hit from the WUHAN like pandemics, it is likely to break existing industrial chains and ASEAN members will be the first to feel the spillover effects of China’s economic doom.
Now is the time for ASEAN to spare no effort to help the recovery of production chain first within and then expand ties with India and other countries in SAARC and also with Japan. That is because the Chinese economy cannot fully recover in the foreseeable future. ASEAN’s trade and industrial chain needs to be strengthened fast and outside of Chinese influence. Joint ventures with SAARC, Ocenia and Japan will ensure return to normal economic activities earliest and this is crucial to restoring normalcy to the regional value chain.
For starters, ASEAN members must coordinate with each other to ensure supplies of raw materials and smooth logistics in the region. They should also make appropriate adjustments to expand imports from India, Japan and Australia. Moreover, high-level cooperation and arrangement should be made between these countries to help regional businesses adapt to Chinese virus shocks to industrial chains.
The China-centered Southeast Asian economy is now finished and needs urgent replacement to give a proper balance and momentum for recovery of the global economy and a major manufacturing base for the world. If ASEAN, SAARC, Japan and South Korea can take the lead in recovering from the Chinese Virus shock, then it will inject great vitality and confidence into the Asia-Pacific and global economies.
