SOUTHEAST Asia has become China's largest trade partner in the first half of the year as the trade war with the US forced Beijing to recalibrate its global supply chain.
China's total imports and exports with Asean nations increased two per cent to US$297.8 billion, accounting for 14.7 per cent of China's overall trade for the period.
According the China's Customs Department, this is up from 14 per cent last year.
The European Union, which was previously China's largest trade partner, saw total trade with China decrease five per cent on the year to US$284.1 billion, partly due to United Kingdom's exit from the bloc.
Third-ranking US suffered a 10 per cent plunge amid deteriorating bilateral ties. The EU and the US accounted for 14 per cent and 11.5 per cent of China's total trade for the first half, respectively.
According to a Nikkei Asian Review report, China is rapidly building a new supply chain in Southeast Asia as the conflict with Washington shuts access to US technology.
China-based manufactures are also shifting production to the region to avoid the import tariffs the US imposed on Chinese-produced goods.
"China maintains close relations with countries like Vietnam, Malaysia and Singapore, which are part of the global supply chain for the electronics industry," Customs spokesperson Li Kuiwen said.
Semiconductors have been a major contributor to their growing trade relationship, with shipments from Asean to China increasing 24 per cent and those from China to Asean increasing 29 per cent on the year.
Although the US is cracking down on chip deliveries to China, due to deteriorating ties and their growing rivalry in the tech sector, many shipments are still making its way to China through Southeast Asia.
Trade was also buoyed by Chinese companies setting up production hubs in Asean countries to circumvent US tariffs on Chinese exports. Many of these plants assemble products using components shipped from China.
China and Asean enacted an updated free trade agreement last October, which lowered the hurdle on rules of origin, currency, services, investments and other fields.
In an attempt to counter US clout, the Chinese government has also promoted trade with Asean and other participants in its Belt and Road infrastructure initiative.
Belt and Road participants accounted for a larger percentage of China's total trade between January and June.
The US and China signed a phase one trade deal six months ago, which set the goal of increasing US exports to China by US$63.9 billion between 2017 and 2020.
Under this plan, US exports to China were expected to increase to about US$110 billion in the January-June period, but the actual figure was just US$56.4 billion.
Shipments of soy beans and other agricultural products, which US President Donald Trump considers a priority, have been slow to grow.
In terms of a "phase two" deal, "I don't think about it now," Trump said last week. There is concern the US could once again harden its attitude on trade with China, through additional tariffs.