School of Business, Conestoga College, 299 Doon Valley Drive, Kitchener, Ontario, Canada N2C 2R9. E-mail: dilip.das@sympatico.ca

Received 29 November 2005; Revised 25 March 2006; Accepted 19 October 2006.

Abstract

China's vertiginous growth after 1978 has not only enhanced its regional presence, but also influenced regional institutions and economic structure. Regional economies, in particular the NIAEs and the ASEAN-4, have been significantly affected, particularly in their trade and investment patterns. This article focuses on the far-reaching domestic and regional ramifications of China's emergence as a large trading economy. China's WTO accession and trade expansion should have favorable welfare implications for both China and the regional economy. Vertical specialization was a key causal factor behind China's strong increase in regional imports; importing for processing, and exporting the final product, has been growing steadily. Foreign direct investment (FDI) has been a vital element of China's reform and growth strategy, and foreign-invested enterprises (FIEs) has played a crucial role in China's growth and globalization endeavors. FDI flows to neighboring Asian economies have been influenced by China's success. However, closer scrutiny reveals that China, the second largest economy in Asia, did not receive a level of FDI incompatible with the size and performance of its economy.