Hollowing-out, Revisited

The perception of the China economic threat is especially acute in Southeast Asia, because many economies there have structural frameworks similar to China. The ‘hollowing-out’ fear has been in existence for quite sometime. However, the process of production migration to China has accelerated since the Asian crisis. The final outcome of this process for the region is far from certain. It could be pessimistic, benign or optimistic. In the short-term, many of Asia’s regional economies will likely see a decline in their living standards. What happens to their economic well-being in the longer-term depends on how willing and how fast they can adapt to the new economic paradigm dominated by China’s manufacturing clout. One thing that is certain is that the surviving strategy for China’s Asian neighbours boils down to a focus on core competence. The rise of China’s economic might is not the end of the world for Southeast Asia; it is not the end of the world for the global economy; and China does not have to be a catalyst for the next Asian crisis as some fear.