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Structural Shift in Türkiye-East Asia Economic Relations: The Demise of Japan and the Rise of China and South Korea

Türkiye’s economic relations with East Asia have gone through a significant structural shift over the last two decades. Previously, Japan dominated Türkiye’s trade with East Asia and foreign direct investment inflows from East Asia to Türkiye. However, recently both South Korea and China have surpassed Japan as major trading partners of Türkiye in East Asia and caught up with Japan in foreign investments in Türkiye. The dependence of the Turkish economy on intermediate inputs from China, in particular, rose remarkably. The shift from Japan toward South Korea, and more significantly, to China in Türkiye’s economic relations with East Asia reflects the changing division of labor in the East Asian region and the rise of China as a manufacturing superpower. In this analysis, we discuss the extent of this shift in Türkiye’s relations in light of the ongoing talks of a proposed free trade agreement between Türkiye and Japan, the changing global trade environment due to the decoupling from China, and the increasing fragmentation of the world economy.

Structural Shift in Türkiye-East Asia Economic Relations The Demise of
 

 

 

 

Introduction

 

The Turkish economy has rapidly integrated with the world economy since 1980, with Europe and the U.S. dominating Türkiye’s international trade and foreign investment inflows for three decades. In the East, Japan has been one of the most important East Asian economies in Türkiye’s trade relations, and in 2024, the two countries celebrate the 100th anniversary of the start of diplomatic relations. Known as one of the most pro-Japanese countries in the world with a great admiration of Japanese culture, Türkiye has always expected further deepening of trade relations with and investments from Japan.

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