Impact of the South China Sea Conflict on Trade between China and ASEAN Countries

Ahmad Anwar, Agus Dwi Nugroho, Zoltan Lakner, Gabor Vigvari
Statistika, 105(3): 366–384
https://doi.org/10.54694/stat.2024.62

Abstract
While territorial conflicts in the South China Sea (SCS) between ASEAN member states and China are escalating, their economic dependency and geographical proximity suggest trade will continue. This study examines the impact of the SCS conflict on China-ASEAN trade. The generalized method of moments (GMM) was used to examine data collected between 2005 and 2022 from China and 10 Southeast Asian countries. The primary variable in this study, the SCS conflict, had no impact on ASEAN countries' trade with China. This is due to several reasons: China has a long history of trade with the region, trade is primarily driven by economic factors that outweigh the potential disruption of SCS conflicts, not all ASEAN members are claimants in the dispute, and a lack of integration in ASEAN internal trade. The findings also highlight that ASEAN’s GDP, China’s GDP, and exchange rate have the potential to boost ASEAN countries' trade with China. On the contrary, the distance between ASEAN countries and China and the average duty reduce total ASEAN countries-China trade.

Keywords
Territorial conflict, international trade, gravity model, GMM