International production sharing and trade fragmentation has become a key feature of East Asian economic development in recent decades. China has taken advantage of this process and has transformed into a global manufacture center within a thirty-year period. The emergence of China has led to the restructuring of the Asian production network and changed the trade pattern in the region. Firms in advanced Asian economies have relocated their production to China, using it as an assembly base and exporting their final products to the US and Europe. This paper analyzes these trends and changes in the region, studying China’s position in East Asia’s production sharing and trade fragmentation, as well as ascertaining how it influences China’s industrial and technological upgrading. We find that China has moved to the Center of East Asia’s production network and become the key partner of its neighboring countries. China’s manufacturing technology has significant upgraded. There is a technology convergence between China and ASEAN-4, although the gap between China and Japan and South Korea remains fairly large and noticeable.

Laike Yang

Published in Berlin Working Papers on Money, Finance, Trade and Development, June 2014