A trade regime shift in East Asia : free trade, economic security, decoupling or all three?

Abstract

The post-Covid recovery in East Asia started slowly in 2022 with a dramatic change in China to deregulate its outstandingly tight pandemic control (the so-called ‘Zero Covid’ policy) in December. China had maintained strong propaganda about the success in pandemic controls, but in fact, the success was achieved not by the policy, but by the herd immunity achieved out of the policy abandonment. Lack of accountability in this process has left distrust against the government, and the domestic demand recovery remains weaker than expected in 2023, together with the troubled property market and the arbitrary medical insurance changes. Global value chains (GVCs) in Asia were frequently disrupted during the time that Factory China followed the controls, including unpredictable production shut-downs and logistics delays. In the post-Covid process, the GVCs have been subject to other additional pressures: geopolitical risks and economic security risks, which are related if not complementing each other, especially for Western Multi National Enterprises (MNEs).