The BFA's second report since 2005 said the phenomena of cross-border production sharing has created a triangular trade flow between advanced Asian economies, developing Asian countries and the rest of the world.

In the past, advanced Asian economies, including Japan and other industrialized economies, completed the entire manufacturing process before exporting their finished goods directly to the United States and European markets. Increasingly, these advanced economies are shifting the export of high value-added products through China and other low-wage countries where the products are re-processed or assembled before being re-exported to the United States and European markets, forming a global production network.

According to the report, parts and components exports and re-exports currently account for more than 45 percent of Asia's overall trade. China has emerged as a major destination for the assembly and other labor- intensive stages of manufacturing.

The report notes that over the last decade, foreign manufacturers have set up more than 300,000 plants and factories in China, most of which are involved in the assembly of imported components that are then re-exported, to more wealthier countries.

Statistics show that the total value of re-processed exports has risen rapidly, reaching 417 billion U.S. dollars, or about 55 percent of China's total exports in 2005.

"Trade with China, in fact, accounts for most of the growth in intra-regional trade in recent years," said the report. Exports to China from the region reached nearly 30 percent of total intra-regional exports in 2004, up from 24 percent in 2000.

About 40 percent of Asian exports to China are for assembly andre-export rather than domestic use.