Abstract
The purpose of the paper is to examine the economic impact of China on Southeast Asian countries, mainly in terms of trade and investment. The paper attempts to examine whether the rise of China poses a threat to Southeast Asia as a region in the area of international trade, especially competition in third country markets, and asks, can they be friends and allies rather than competitors in international market? Secondly, the paper also questions if the concentration of foreign direct investment (FDI) in China is resulting in a diversion of FDI away from the region. Do FDI in China and Southeast Asia complement one another when it comes to the international division of labour? On the other hand, the increasing role of China as an international trader and global investor provides an opportunity for Southeast Asia countries to integrate with the Chinese economy. The huge domestic market of China also provides vast opportunities for investment, especially through connections with their respective ethnic Chinese businesses in the region. The overall assessment is that the rise of China will benefit Southeast Asian countries, especially in terms of China's role in the Asian production network, destination for investment, its outward investment and more importantly, its huge and growing domestic market. All these turn China into another driver for economic growth in Asia.
Keywords: China, FDI flows, Southeast Asia, trade, investment, Asia production networks.
