Production Networks and Trade Patterns in East Asia: Regionalization or Globalization?

TLDR

Network trade has grown faster than overall manufacturing trade, and East Asia’s reliance on it is proportionally higher, with China as the key final‑assembly hub, deepening regional interdependence. This paper examines the implications of global production sharing for economic integration in East Asia, focusing on trade flow behavior after the 2008 global financial crisis. Despite network trade’s growth, East Asian export dynamism remains heavily dependent on the global economy, a pattern that persisted after the 2008 crisis.

Abstract

This paper examines the implications of global production sharing for economic integration in East Asia with emphasis on the behavior of trade flows in the wake of the 2008 global financial crisis. Although trade in parts and components and final assembly within production networks (“network trade”) has generally grown faster than total world trade in manufacturing, the degree of dependence of East Asia on this new form of international specialization is proportionately larger than elsewhere in the world. Network trade has certainly strengthened economic interdependence among countries in the region with the People's Republic of China playing a pivotal role as the premier center of final assembly. However, contrary to popular belief, this has not lessened the dependence of the export dynamism of these countries on the global economy. This inference is basically consistent with the behavior of trade flows following the onset of the global financial crisis.