Introduction Chinas impact on its neighbors countries essentially in trade and investment was positive.

This paper assess whether the growth of China is a threat or an opportunity to the regions countries. Also, the paper will examine if foreign direct investment inflow into China will have a negative impact in the region countries via a diversion of FDI. China offers massive opportunities for investments due to its vast domestic market, particularly over businesses relations with the region. The aim of this paper is to demonstrate that the rise of China will profit its neighbors countries, especially and regarding Chinas role in the Asian production network, target for investment, its external investment and more essentially, its vast and rising domestic market. All these make China a major driver for economic development in Asia and in region countries.

I- The impact of rise of the China on region countries Chinas foreign direct investment inflows have been complementary to other FDI inflows in most host countries, particularly into its region economies. Indeed, growth of China provides opportunities to the regions countries to perceive their FDI inwards increasing and Multinational companies investing and establishing their firms to respond to the need of China.

(Ministry Of Commerce Peoples Republic of China, 2011) The fast economic growth of the ASEAN economies has seen highest quantities of FDI flows into ASEAN (Singapore Department of Statistics, 2010). ASEAN FDI flows augmented from US$35.3 billion in 2004 to extend atUS$69.9 billion in 2007. In 2008 ASEAN FDI inflows extended to US$59 billion (Figure 1). Asian done quite well in 2010, throughout which, FDI inflows grew by 24.1%. Top 10 countries in Asia that attracted the biggest volume of FDI, five were from South East Asia (Singapore, Indonesia, Malaysia, Vietnam and Thailand), four were from East Asia (China, Hong Kong, South Korea and Macau), and India was the sole country in South Asia to make it to the list.

Consequently, FDI inflows to LDC like Cambodia, Myanmar and Laos seen a diminution of 0.6% in 2010 due to more attraction of FDI into Vietnam, Indonesia and Singapore.

China and ASEAN mutual investment also has augmented, although it represents just small part of the two regions total FDI inflow (Narine Shaun, 2008). With a more coherent regional economy, FDI inflows to CAFTA from abroad the region are estimated to increase more. Indeed, between 2002 and 2010, FDI inflows to ASEAN doubled and to other region countries as well like South Korea, Japan, and Hong Kong. Chinas growth did not divert investments in those countries, in contrast, it boost their economy and attract more FDI except for the year 2009 where global economy and investment were affected due to global crisis within this year. (Tai Wei Lim, 2008) It is predictable that improvement towards regional integration with the objective of enhancing ASEAN competitiveness and attractiveness as an investment base will see more quantities of FDI inflows in the coming years (Figure 3).

Furthermore, bilateral investment has also increased significantly. For instance, between 2002 and 2008, China's total FDI outflow to ASEAN reached US$4.9 billion, which is 2.6% of Chinas total outward investments (Table 2).

(Yunhua Liu and Beoy Kui Ng, 2010) As we saw in the table and figure above, an increase in FDI inflows into China is positively related to an increase in FDI inflows into other Asian developing economies. (Nargiza Salidjanova, 2011) As China grows, its market size increases and its demand for minerals and resources rises accordingly. Consequently, Multinational firms go to China to manufacture and to vend in China. In parallel, other MNEs go to Asian developing countries to invest and set up their industries, to extract minerals and resources to respond to the demand of Chineses market and export them to China. Chinas growth is a source of emerging investment and rise economy of its neighbors countries. As China grows, its industrial manufacture progressively requests raw materials and manufactured components, which, in other side, boosts rapid growth in net exports from its neighbors countries. Chinas import need benefit Japan, Taiwan, Indonesia, the Philippines, Singapore and also other LCD countries like Myanmar and Cambodia, which are mainly well positioned to profit from this complementarity to export the necessary product to China. Fore instance, with USD 1498 million, China is principal in Myanmars import. Myanmar export to china their main resource such agricultural produces, aquatic products, rubber and others. In recent year, the trade between China and Myanmar has increased. China import from Myanmar has augmented 2.5 times, from US$93.7 million in 2001 to US$231.6 million in 2007. Also Myanmars exports to China has seen improvement, where in 1999 its export to China was only US$33 million and in 2006 they had augmented 6.9 times, attaining US$229.7 million.

Cambodia has seen its export also increase due to the huge demand of chinas market. Cambodias export in the year 2010 has increased 342 percent from 9.5 million USD to 42 million USD in the same year. China imports mainly agricultural products, rubbers, fish, timbers, some garments and textiles. China's imports of nickel ore and concentrates surged to an all-time high of 4.19 million tonnes, far eclipsing the previous high of 2.85 million tonnes in September 2009. Booming imports, in excess of two million tonnes, from both Indonesia and the Philippines were the driver.

(Fenna Egberink, 2011) trade between ASEAN and China has effectively increased considerably from mid- 1990s (Figure 5). Mutual trade between 2001 and 2008 augmented more than ten times, from around US$20 billion to US$223 billion, according to Asian Development Bank. Since China joined WTO in 2001 and the creation of CAFTA, the trade between China and its neighbors countries has even been more rapid. (Madam XUE Hanqin, 2009) Bilateral trade between 2001 and 2008 raised nearby 30% a year, compared to the years between 1995 and 2001 where was 15%. Therefore, China became ASEANs 3rd major trading partner and ASEAN Chinas 4rd major by 2008.

Meanwhile, ASEAN countries are also trading more with each other (Beeson Mark, 2007). Between 2001 and 2008, intra-regional trade within ASEAN grew from US$164 billion to US$481 billion. Intra-ASEAN export also rose slightly, from about 22% to 26% (Figure 2). ASEAN are still developing their businesses and improving their exports despite of the rise of China. Chinas development still not show us any real impact in the growth of ASEAN economy and in their labor market.

(Wang Gungwu and Zheng Yongnian, 2009) East Asian can benefit from the growth of Chinese internal market to increase their export considerably and take advantage of the opportunities that it will be given to them. East Asian economies will profit of Chinese trade liberalization, the rise of China will have a positive effect as Chinese absorption emerges to dominate regional demand. The growth of China has become important for less developed countries in Southeast Asia. For instance, in 2009 in Cambodia, China is rated as Number 1 investor, and it is assumed to be the same in Laos and Myanmar where China FDI is important. The FDI inflows in Asian developing countries will have a better employment generating. For instance from 2004 Philippines has seen a net increase of employment to attain 7.2 of unemployment rate in 2011, as well as for Indonesia, which its unemployment rate starts to decrease from 11.1 in the beginning of 2005 to attain 6.8 in 2011. 7

EU-27 exports and imports of goods to from ASEAN countries

As shown in (figure 5) the ASEAN-6 (Philippines, Indonesia, Malaysia, Vietnam, Singapore, and Thailand) have seen their unemployment rates decrease within the years, the reason why the unemployment rates in ASEAN countries are low. This is because they are starting to attract investments that used to go to China (George T. Haley, 2010) because of the rise of wages in China (due to the new China government policies that are made to revaluate and increase the minimum wage). This encouraged firms to outsource to Southeast Asia and increase their employment as the (figure 6) show us an average hourly wage between china and some ASEANs country and we can see the gap between Chinas wage and other ASEANs country.

The (table 1) show us the unemployment rate of Southeast Asia in the year 2011; we notice that the unemployment rates are low despite of the rise of China. (According to tradingeconomics.com) Thailand, Singapore, Vietnam and Malaysia all have unemployment rates at or lower than 3%, which rank them among the top six overall.

Chinas growth cannot be seen negatively in region countries. The facts show that region countries still developing and even more with the rise of China. Among the ASEAN-5 (Indonesia, Malaysia, Philippines, Thailand, Vietnam), development is estimated to stay solid in the more locally oriented Indonesia and Vietnam. Products and services exports and domestic demand are estimated to maintain development in Indonesia, with a modest spontaneous in investment estimated to counterbalance the retreat of fiscal stimulus. In Vietnam, robust domestic demand, rapid industrialization, and relatively robust foreign demand should continue to underpin stable and high growth. Thailand and Malaysia are planned to deal at around 3.5 percent in 2009, before returning to positive growth in 2010. The Philippines is avoiding shrinkage in 2009, thanks to the elasticity of payments and thus private consumption, but development is estimated to restrain slightly in 2010 after the fiscal incentive declines.

10

II-Chinas emergence and its impact on the regions 1- South of Korea (International Monetary Fund, 2011) As shown in (Table 5), the countrys improved attracting FDI inflow within years. So from 2001 to 2010 the FDI inflow increased more than ten times. However, FDI still inflow in the country in parallel with the growth with China. China did not affect the growth of the South of Koreas economy. Thanks to the new capital asset coming from foreign investment new jobs were created and as result decreased the unemployment rate of the country. Financial year-wise inflows of foreign direct investment

11

Gross domestic income has seen a growth by 5.8%, the fastest grow in 8 years due to the capital inflow from FDI. Besides foreign investment, China contributes to improve the country development and in 2010 China invests $414 million into different local projects. China benefit from its growth other region countries by investing

The rise of China did not create loss jobs in South of Korea due to the FDI inflow in the country where MNEs create new jobs in the labor market. (Figure 7) show to as that the employment rate rose by 4.1% in 2010, after weak growth in 2009, reinforced by a stronger labor market. (Index Mundi, 2011) Employment increased by 323,000, due to the job creation programs managed by the government. Real wages increased also by more than 3%, after reducing by 6% in 2009.

12

2- Myanmar, Cambodia Emerging and developing countries do not see Myanmar as a competitive destination to invest in. Indeed, Western countries gave sanctions that have considerably stuck Myanmar economic growth. Asian countries prefer invest elsewhere in Southeast Asia, such as Vietnam.

In contrast, China invests around $1.848 billion in Myanmar until January 2010, which represent 11.5% of Myanmar total FDI inflows. In May 2010, China invest in the country $8.173 billion plus Hong Kong who invests $3.143 billion, bringing Chinas FDI inflows in the country to more than $10 billion. Myanmar has seen its economy growing (figure 10) and especially from 2006 where foreign investments were the more important and most of them came from the region. This affect job creation in the country since new investment hired employees, which decrease the unemployment rate in the country

13

In the case of Cambodia, in recent years, Chinese presence in the country has increased quickly. Indeed, in 2008 US$80 billion was invested into Cambodia by 360 Chinese investment projects. Recently, US$400 million of Cambodian debt was abandoned by China. Chinas growth permits to benefit Cambodia to enhance its economy via FDI inflow, the effect has seen in job creation and a decrease in unemployment rate of the country.

14

Indonesia GDP (at PPP) per capita in 2008 was 2,140 USD per year (ADB 2009). The economy grew quite quickly throughout the last several years: in 2007, the growth rate of GDP attains 10.2% and in 2008, regardless of the start crisis still 6.7%.

15

3- Indonesia (Euromoney Country Risk, 2011) The country continues to grow; Chinas growth did not affect so much the economy of the country. Investments were strengthened by improvement in the domestic and global investment climate, an appreciation of the local money, and an increase in credit. Also in 2010, Indonesia has seen $26.2 billion surplus in its capital and financial account, as it was only $5.0 billion in 2009 because of FDI inflow in the country and greater inflows of portfolio. All this grow in parallel to the rise of China show that the country manufacturer industry still work and grow and even thanks to Chinas effect; which was an opportunity for the country to see their export grow due to the massive demand of China and firms outsourcing to the country. As we can see in the figure below the export of the country toward the world did not shrank and still evolving within the years except between 2008 and 2009 due the global crisis at this period. We notice that the growth of China did not effect the development of the country.

(The World Bank, 2011) Chinese investing in Indonesia has increased by the end of 2010. However, more than 1,000 Chinese firms had invested $6 billion, creating 30,000 jobs, in the country. The investments were essentially in the infrastructure and energy sectors. China ranked the 13th in terms of FDI in Indonesia, according to 16

official data. FDI inflows into the country where China played an important role generate new jobs in the country, helping to lower the unemployment rate to 6.8% in February 2011 from 8,1% a years earlier (Figure 10). The growth of China has benefit a lot the country by taking advantage the opportunities that brought this growth whether in increasing FDI inflow into the country or increasing employment. Indonesia is one of the country that rise of China has benefited a lot.

17

4- Malaysia and Vietnam Malaysia enhances its exports despite of Chinese competition. Malaysia relies a lot on resource and labor intensive manufactured exports. Nearly 2/3 Malaysia's net exports compete with China, finding varied kind of electronics. Six years ago, despite of robust Chinese net export advance in these markets, Malaysia significantly augmented its exports in the majority of these competing areas.

Therefore, Chinese competition does not seem to be harming and affecting Malaysia's manufacturing export sector and could well be reinforce it. Despite its complementarity with China now is lower than that of most other regional economies, Malaysia also is profiting from China's bigger demand for resources and components. Indeed, in 2008, Malaysia exports to China US$27.32 billion, which represents almost one-tenth of its global export (RM81.3 billion). Also in 2010, the bilateral trade between China and Malaysia was US$46.73 billion, representing 13,5 percent of its global trade. Chinas growth does not divert FDI from Malaysia and even more Malaysia took advantage from its growth to improve its economy. (Beoy Kui 2008) The rise of China does not affect so much the investment. However, the total growth of GDP increased due to the FDI inflows into the country.

18

Chinas effect seems not felt so much in Malaysias economy growth and in labor force. For the economy, the growth was reinforced by particularly strong recovery in manufacturing production (11.4%) and by robust growth in services (6.8%) and construction (5.2%) (Figure 3.26.2). (ASEAN 2011) For the unemployment rate as shown in figure below was declined to 3.0%, and labor force participation rate jumped to 65.0 in July 2011. Like other ASEAN countries, the rise of China did not create any job loss or harmful the country.

19

Conclusion The rapid growth of Chinese economy was one of the main driving forces in the economic integration of the Asian. The rise of China and robust investment expansion are enhancing the region and offering the neighbors countries economies with an expanding and varied market. The rapid rise of China will also raise demand for resources and raw materials to help the ongoing growth of production as we saw in South East Asian country above. Both will make great opportunities not just for Asian economies to augment their exports toward Chinese markets, but also for multinational companies to invest in Asian economies so as to fabricate commodities and extract resources to furnish the Chinese markets. Chinas growth did not crowding out its neighbors country and

20

References ASEAN Secretariat (2011). Statistics Of Foreign Direct Investment In ASEAN by Public Affairs Office, pp: 13-42 Asian Development Outlook (2011). SouthSouth Economic Links by Asian Development Bank, pp 133-140 Association of Southeast Asian Nations ASEAN - (2007). Joint communiqu of the nineteenth meeting of the labor ministers meeting, p: 7-11 Association of Southeast Asian Nations ASEAN - (2011). Principal Statistics of Labor Force, Malaysia Beeson Mark (2007). Regionalism and Globalization in East Asia: Politics, Security and Economic Development by Palgrave Macmillan, p: 56 Beoy Kui (2008). The Asian Production Networks and the Role of Overseas Chinese Business by Asian Culture, pp: 13-21 Charting Progress Towards Regional Economic Integration (2011). ASEAN Economic Community Scorecard Euromoney Country Risk (2011). Economic Overview Fenna Egberink (2011). ASEAN, Chinas Rise and Geopolitical Stability in Asia by The Hague, Netherlands Institute of International Relations (Clingendael), pp: 719-29 George T. Haley, Usha C. V. Haley and Chin Tiong Tan (2010). New Asian Emperors: The Business Strategies of the Overseas Chinese by John Wiley & Sons (Asia), pp: 26-33 John Walsh (2008). Labor Market Issues for the ASEAN Region by The 4th International Postgraduate Research Colloquium IPRC Proceedings - p: 32 Index Mundi (2011). Republic Of Korea Unemployment rate

21

International Monetary Fund (2011). Republic of Korea Outlook Liu Yunhua and Ng Beoy Kui (2009). Impact of A Rising Chinese Economy and ASEANs Responses by Economic Growth - Nanyang Technological University, pp: 10-14 Madam XUE Hanqin (2009). China-ASEAN Cooperation: A Model of GoodNeighborliness and Friendly Cooperation by ASEAN Studies Centre, Institute of Southeast Asian Studies (ISEAS) Ministry Of Commerce Peoples Republic Of China (2011). Statistics of January-August 2011 on National Absorption of FDI Mongolia outlook (2011). global outperformer surging higher Mutrap (2011). Exports To The Republic Of Korea Enjoy AKFTA Preferences Nargiza Salidjanova (2011). Going Out: An Overview of Chinas Outward Foreign Direct Investment by Policy Analyst for Economic and Trade Issues Narine Shaun (2008). Forty years of ASEAN: A Historical Review by The Pacific Review, (volume 21 number 4), pp: 337-345 Sheng Lijun (2009). China and ASEAN in Asian Regional Integration by Routledge Singapore Department of Statistics (2010). Total direct investment abroad by country/ region, 2005-2009 Tai Wei Lim (2008). ASEAN Coping Mechanisms to Manage the Rise of China by East Asia (volume 25, number 4), pp: 227-241 The World Bank (2011). Indonesia Economy: Strong performance but risks lie ahead Trading Economics (2011). Indonesia Unemployment Rate at 6.80 percent Yunhua Liu and Beoy Kui Ng (2010). Facing the Challenge of the Rising Chinese Economy: ASEANs Responses by Review of Development Economics, pp: 667-668

22

Wang Gungwu and Zheng Yongnian (2009). China and the New International Order by Routledge

23