26-progress of the china-asean free trade area

7/31/2019 26-Progress of the China-ASEAN Free Trade Area

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Progress of the China-ASEAN Free Trade

Area

Zhang Bin Wang Xinjie

Department of World Economics,

Business School of Wuhan University

Address Department of World Economics,

Business School of Wuhan University

Post Code 430072

E-mail [email protected]

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Progress of the China-ASEAN FTA

Abstract In November 2002, China and ASEAN signed Framework Agreement on

Comprehensive Economic Co-operation between the Peoples Republic of China and the

Association of South East Asian of Nations, which determined the basic structure of

China-ASEAN Free Trade Area. In recent two years, the construction of

China-ASEAN Free Trade Area has achieved great progress. The co-operation in a

variety of areas between the two sides has been developing gradually. The

development of the economic collaborations between China and ASEAN has alreadyentered into a new stage.

Key WordsChina-ASEAN Free Trade Area Progress

Regional economic co-operation is one of the main development trends of current

world economy. Establishing various preferential arrangements on economic and

trade co-operation, as well as participating in regional economic co-operation

organizations in order to seek more opportunities for economic development, has

become an important political choice for most countries. China-ASEAN Free Trade

Area is the first formal regional integrative organization that China has ever

participated in. Not only will it be of great importance for China, but also have great

impact on the economic and political relationship between China and ASEAN. This

article is to analyze the implementation progress of China-ASEAN Free Trade Area

since the signature of Framework Agreement on Comprehensive Economic

Co-operation between the Peoples Republic of China and the Association of South

East Asian of Nations (hereinafter briefly referred as Framework Agreement), as well

as make predictions on the developing foreground and trend.

Part One

The Basic Conditions before the Startup of China-ASEAN FTA

Since the 1990s, the relationship between China and ASEAN has been

developing rapidly. It is at their best phrase in history. In December 1997, theuppermost leaders of China and ASEAN met for the first time. The meeting

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determined the neighborly mutual-trusting fellowship. Subsequently, China signed the

general agreement for bilateral co-operation facing 21st century with all the ten

ASEAN nations, which determined the integral targets, guidelines of actions and

domains of bilateral co-operation, especially determined the important status and

concrete domains of bilateral eco-commercial co-operation.

In regard to trade in goods, the bilateral trade between China and ASEAN

increases rapidly. Following Japan, USA, EU and Hong Kong, ASEAN has been the

fifth trade partner of China for many years. From 1994 to 2001, the trade volume

between China and ASEAN has increased from $13.28 billion to $38.488 billion.

Except for the volume in 1998, which was influenced by the South East Asian

Financial Crisis and declined a little, the growth rate of bilateral trade for all the other

years kept above 20% (see Table 1). Meanwhile, the proportion of bilateral trade inthe total external trade for both sides has been increasing year after year. According to

the results of statistics (see attached table), from 1995 to 2000, the proportion for

China has increased from 6.9% to 8.3%, where the proportion for export has increased

from 6.42% to 6.96% and the proportion for import has increased from 7.37% to

9.58%; the proportion for ASEAN has increased from 2.9% to 5.0%.

In regard to mutual investment, ASEAN is an essential area from which China

attracts foreign investment. The foreign investment of ASEAN from China also

increases rapidly. By the end of 20011, the projects invested by the ASEAN members

in China add up to 17,972 items with consultative amount of $53.468 billion which

accounts for 7.2% of the total amount of investment attracted by China; The actual

investment amount add up to $26.175 billion which accounts for 6.6% of the total

amount of investment. At the same time, the investment made by Chinese enterprises

towards ASEAN also increases year after year. By the end of 2001, the projects

invested by Chinese enterprises in the ASEAN members add up to 740 items with

total project investment of $1.091 billion among which there is $0.655 billion fromChina side.

In addition, from 1998, ASEAN has become Chinas most essential overseas

market of project contract, instead of the Middle-East Area, where Singapore is the

biggest foreign market to which China sends overseas labors. In 2001 2, Chinese

enterprises signed 3833 contracts and labor co-operation projects with the ASEAN

members with contracted amount of $2.6 billion and turnover of $2.089 billion

1The Status and Prospect of the Development of Economic and Trade Relation between China and ASEAN,Southeast Academe Research, No. 5 2002, PP.75-792 Same with note 1

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accomplished, where contracted amount of contract projects amounts to $1.83 billion

and the accomplished turnover is $1.203 billion, and contracted amount of labor

co-operation amounts to $0.719 billion and the accomplished turnover is $0.795

billion.

Table 1. The Integral Situations of China-ASEAN Trade since 1994

$100 million

Export and Import China Export China Import BalanceYear

Sum Rate% Sum Rate % Sum Rate% Sum

1994 132.8 23.7 63.78 36.2 68.3 13.9 -4.52

1995 184.03 39.3 90.01 41.1 94.02 37.7 -4.01

1996 192.06 4.4 88.18 -2 103.88 10.5 -15.7

1997 228.95 19.2 109.19 23.8 119.7 15.3 -10.57

1998 216.21 -5.6 93.47 -14.4 122.74 2.5 -29.27

1999 256.83 18.8 111.76 19.6 145.07 18.2 -33.31

2000 367.14 43 155.89 39.5 211.25 45.6 -55.36

2001 384.88 4.8 163.21 4.7 221.67 4.9 -58.46

2002 547.7 31.7 235.68 28.3 312 34.4 -76.3

2003 782.52 42.89 309.25 31.22 473.27 51.70 -164.02

2004 566.61 38.06 221.66 34.10 344.94 40.72 -123.28

Note Data of 19942001 is of six countries of ASEANBrunei Darussalam, Indonesia,

Malaysia, Philippines, Singapore, ThailandData of 2002-2004 is of the whole ASEANData of

2004 is the sum of Jan.-July.

Resource Compiled fromthe statistics of China Customs

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Considering the more and more frequently political and eco-commercial

communications between China and ASEAN, onNovember 6, 2001, Chinese Prime

Minister Zhu Rongji formally put forward the idea of constructing a China-ASEAN

Free Trade Area and the proposition of strengthening the political mutual trust and

support between China and ASEAN.

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Data of 1994~2002 is fromNegotiations between one and ten: Analyze the influencing factors and difficulties forChina-ASEAN Free Trade Area, Intertrade, No.8 2003PP.22-27; Data of 2003 and 2004 from

http://yzs.mofcom.gov.cn

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Part Two

Fundamental Contents of China-ASEAN FTA

In November of 2002, China and ASEAN formally signed the Framework

Agreement. There are three parts and four Annexes4 with 16 articles in Framework

Agreement, which includes Preamble, Objectives, Measures, Trade in Goods and

Services, Investment, Early Harvest, Other Areas of Economic Co-operation,

Timeframes, Most-Favored Nation Treatment, Dispute Settlement Mechanism,

Institutional Arrangement for Negotiations and so on.

According to Framework Agreement, the objectives5 of China-ASEAN FTA are

to: a) strengthen and enhance the co-operations in economy, trade and investment

between the Parties; b) progressively liberalize and promote trade in goods and

services as well as create a transparent, liberal and facilitative investment regime; c)

explore new areas and develop appropriate measures for closer economic co-operation

between the Parties; d) facilitate the more effective economic integration of the newer

ASEAN Member States and bridge the development gap among the Parties.

The Parties agree to take measures for the economic co-operation as follows: a)

progressive elimination of tariffs and non-tariff barriers in substantially all trade in

goods; b) progressive liberalization of trade in services with substantial sectoral

coverage; c) establishment of an open and competitive investment regime that

facilitates and promotes investment within the China-ASEAN FTA; d) provision of

special and differential treatment and flexibility to the newer ASEAN Member States;

e) provision of flexibility to the Parties in the China-ASEAN FTA negotiations to

address their sensitive areas in the goods, services and investment sectors; f)

establishment of effective trade and investment facilitation measures; g) expansion of

economic co-operation in areas as mutually agreed on between the Parties that willcomplement the deepening of trade and investment links between the Parties; and h)

establishment of appropriate mechanisms for the purposes of effective

implementation of the Agreement.

Trade in Goods, Trade in Services, Investment and Other Areas of Economic

4 Four Annexes include Specific Products covered by TheEarly HarvestProgramme, Exclusion List of a party for

products excluded from The Early HarvestProgramme, Product Categories for Tariff Reduction and Elimination,

Implementation Timeframes.5 See Framework Agreement on comprehensive economic co-operation between the Peoples Republic of Chinaand the Association of South East Asian of Nations

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Co-operation are all concluded in China-ASEAN FTA.

1. Trade in Goods

China-ASEAN FTA adopts closed preferential tariff measures in this area, and

meanwhile it doesn't increase trade barriers against the countries out of this area. It

implements a pattern of eliminating the duties year by year similar to CEPT of

ASEAN FTA, and divides the products into 3 categories, including more than 6000

kinds of products.

(a)Early Harvest Products: China and ASEAN have already negotiated to determine

on the scope of the Early Harvest Products, involving more than 600 agricultural

products. And they agree to eliminate the tariff rates of these products to 0%-5%

within 3 years at the latest Jan 1, 2004. The newer ASEAN Member States 6 can be

delayed for 3 or 4 years.(b)Sensitive Products: In order to guarantee the consistence of the sensitive products

restriction standard of China and ASEAN, all Parties of Framework Agreement

can list sensitive Products. The maximum standard is a certain percent of the

volume of trade and the amount of the products, and the tariff rate of sensitive

products will apply the Most-Favored Nations tariff rates before the completion of

the FTA.

(c)Normal Products: They are the products except for Early Harvest Products and

Sensitive Products. High tariff rates of some products will be gradually reduced

by a deeper degree. Furthermore, the Parties should negotiate on agricultural

products Out-of quota.

The Rules of Origin is an important content ofFramework Agreement, and the

standard of local contents is the core of carrying out the rules of origin. Generally

speaking, the higher the requirement of local contents or added value is, the more

effectively it can prevent the products out of the area from taking advantages of the

free trade area, thereby to promote the growth of trade in the area. But, it may alsoform a trade barrier against the products out of the area, and bring trade-diversion; on

the converse, the lower the requirement of local contents or added value is, the greater

chance the products out of the area can enjoy the preferential treatment of free trade

area through simple process.

China-ASEAN FTA will set the principle of cutting down non-tariff measures,

and guarantee that non-tariff measures do not become obstacles of free trade.

Non-tariff measures that Framework Agreement involves include: Anti-dumping and

6 Refer to Cambodia, Lao PDR, Myanmar, Viet Nam

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anti-subsidy tariff, standard, authentication, pricing, import license, import quota,

animals and plants health quarantine, etc. Implementation of non-tariff measures is for

simple, transparent and effective management. Anti-dumping measure, animals and

plants hygiene quarantine, the import license and import quota are the main non-tariff

measures of China and ASEAN.

2. Trade in Services

In order to promote the liberalization of Trade in Services of China-ASEAN FTA,

the Parties, on the basis of the WTO General Agreement on Trade in Services (GATS),

will enhance the co-operation in services and reduce the trade restriction in services

and expand the depth and scope of liberalization of trade in services. China and

ASEAN can release the restriction of trade in services properly, especially enhance

the co-operation of respects of the tourism services, distributing services, commercialservices, and promise to move forward to trade in services, such as finance, insurance

and telecommunication, steadily according to GATS norm and WTO.

3. Investment

It is the main objective ofFramework Agreementto promote the capital float in

FTA, and attract the investment beyond the FTA, and create a liberal, facilitative,

transparent and competitive investment regime. China and ASEAN will strengthen

co-operation in investment, facilitate investment and improve transparency of

investment rules and regulations. The scope of China-ASEAN FTA Investment

Agreement applies to direct investment, investment restriction and stock equity

stipulation restrained by the relevant laws and regulations on domestic investment of

various countries.

4. Other Areas of Economic Co-operation

The parties agree to strengthen their co-operation in 5 priority sectors as follows:

agriculture, information and communications technology, human resources

development, investment and Mekong River basin development. And co-operationwill be extended to other areas, including banking, finance, tourism, industrial

co-operation, transportation, telecommunication, intellectual property, small and

medium-sized enterprises (SMEs), environment, bio-technology, fishery, forestry and

forestry products, mining, energy and sub-regional development.

Measures to strengthen co-operation, which has been agreed on by the Parties,

include: (a) promotion and facilitation of trade in goods, services and investment,

including the coincidence standards, technical barriers to trade/non-tax measures,

customs co-operation, and so on (b) enhancing the competitiveness of SMEs (c)

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promotion of E-commerce (d) capacity building (e) technological transfer

In addition, Framework Agreement has given the schedule of China-ASEAN

FTA development processes, which bring up the time of negotiation and execution on

trade in goods, trade in services, investment, together with other areas of economic

co-operation. For trade in goods, the negotiations on the agreement for tariff reduction

or elimination and other matters shall commence in early 2003 and be concluded by

June 30, 2004. The negotiations on the Rules of Origin for trade in goods shall be

completed no later than December 2003.China and the Six Countries of ASEAN 7 will

establish the China-ASEAN FTA covering trade in goods by 2010, and by 2015 for

the newer ASEAN Member States. For trade in services and investments, the

negotiations on the respective agreements shall commence in 2003 and be concluded

as expeditiously as possible in accordance with the timeframes. For other areas ofeconomic co-operation, the Parties shall continue building upon existed programs,

develop new economic co-operation programs and conclude agreements on the

various areas of economic co-operation. The Parties shall do so expeditiously for

early implementation in a manner and at a pace acceptable to all the parties

concerned.

To ensure the implementation of Framework Agreement, Institutional

Arrangements for the Negotiations and Dispute Settlement Mechanism will be

established for the development of China-ASEAN FTA. The China-ASEAN Trade

Negotiation Committee (China-ASEAN TNC) has been established to carry out the

programs of negotiations set out in Framework Agreement. The Parties may establish

other bodies if necessary to co-ordinate and implement any economic co-operation

activities undertaken according to Framework Agreement. China and ASEAN will

build appropriate, formal dispute settlement mechanism to carry out Framework

Agreement.

Part Three

Progress and Breakthrough of China-ASEAN FTA after the Startup

of China-ASEAN FTA

Although negotiations for China-ASEAN FTA on trade in goods have not been

7 Refer to Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore, Thailand

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completed yet, but the trade between China and ASEAN has developed forward

smoothly, and the bilateral volume of trade increased from $547,67 million in 2002 to

$78,252 million in 2003. Up to now, after 15 meetings held by China-ASEAN Trade

Negotiation Committee, both sides have already agreed on the main issues of Trade in

Goods, Services, Investment and Co-operation of Economic and Technology, and

have reached extensive common understandings.

1Postponed negotiations of trade in goods and evolutional trade relations

From January 1, 2004, the Early Harvest plan under the frame of

China-ASEAN FTA has already entered into effect. Tariffs of about 600 kinds

agricultural products including fruits and vegetables begin to be reduced, and by 2006

the tariffs of these products will be eliminated8. However, because of some difference

in some technological aspects between ASEAN and China, the negotiation of trades ingoods, which should be finished on June 30, 2004, is still in process. Pengiran Mashor

Pengiran Ahmad, Deputy secretary-general of ASEANs Secretariat, pointed out that

different suggestions would not influence the negotiation progress of Free Trade Area.

It is estimated, before the leaders meeting of China and ASEAN in November 2004,

that the negotiation of trade in goods will be finished 9.

Though negotiations of trade in goods are postponed temporarily, but it has not

influenced the smooth development of bilateral trade between ASEAN and China at

all. The amount of goods trade between China and ASEAN reached $78,252 million

in 2003, and grew by 42.89% compared with 2002(See Table 2). In the first half year

of 2004, the amount of goods trade between China and ASEAN reached $47,798

million, and increased by 39.7% compared with the same period of last year 10.. By the

end of this year, it is hopeful that the trade between China and ASEAN would exceed

$100 billion with such rate of growth.

Table 2.Bilateral Trade of China-ASEAN Free Trade Area started since2003

8 Under the timeframes of The Early Harvest Programme, the tariffs of 188 items of fruit and vegetables have beeneliminated from October 1,2003, between China and Thailand. On June 3,2004, China, Thailand, and Singaporesigned the protocol, and planed to expand zero tariff of fruits and vegetables between China and Thailand, toChina, Thailand, and Singapore. (Economic Information Daily, August 30, 2004)9http://www.chinanews.com.cn, September 19, 200410According the latest statistics of Ministry of Commerce of China, from January of 2004 to August, the value ofbilateral trade of China and ASEAN reached $65.6 billion. (http://www.chinanews.com.cn, September 19, 2004)

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million $

2003 2004.1-6

Country/area Total Export Import Total Export Import

Brunei Darussalam 34617 3389 31228 21271 1941 19330Myanmar 107725 90771 16953 54784 42928 11856

Cambodia 32065 24965 2600 22654 21288 1366

Indonesia 1022905 448075 574830 610344 266006 344338

Lao PDR 10944 9824 1120 6033 5444 589

Malaysia 2012782 614115 1398667 1215724 358511 857213

Philippines 940010 309381 630630 575626 195501 380125

Singapore 1935228 886853 1048376 1192454 539557 652897

Thailand 1265529 382823 882706 777513 241105 536408

Viet Nam 463431 317852 145580 303453 176378 127075

ASEAN 7825236 3092547 4732689 4779855 1848658 2931198

Recourses Compiled from the statistics of Chinese CustomsIntertrade, 2004 Vol.2 and Vol.8

2Bilateral investment increasing rapidly

At present, neither side has carried on a negotiation with concrete co-operation in

the field of investment and service trade yet. But co-operation between both sides in

this field is closer day by day.

The investment between China and ASEAN develops from the one-way

investment, which belongs to Enterprises of ASEAN, to now the mutual investment in

which China and ASEAN are both as the investment target's countries. In recent years,

because of geographical proximity and the similar culture background, the ASEAN

countries have already become the investment focus of Chinese enterprises gradually;

the scale of investment expands year by year and the growth rate of investment is

speedy. Now, ASEAN has already become the third largest destination of Chinas

investment, following Hong Kong and USA. According to the statistics disclosed by

the Department of Asian Affairs of Ministry of Commerce of China11, by the end of

2003, the number of investment projects of Chinese enterprises in the ASEAN

countries has already risen up to 857 and the amount of investment from China is

about $940 million. At the same time the number of investment projects of ASEAN

enterprises in China has already risen up to 22075; the investment agreed upon

amounts to $64,590 million which is about 6.85% of the total contract value of the11 http://www.drcnet.com, July 12, 2004

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foreign capitals absorbed by China and the actual investment amount is 32,370

million dollars which is about 6.46% of the actual value of foreign capitals used by

China.

3Economic co-operation among other areas developing progressively

With the speed-up of trade negotiation on CAFTA, China and ASEAN

strengthened the co-operation in other areas of Economic Co-operation, and achieved

great improvement. The Joint Declaration, released at the 7th Leaders meeting of

ASEAN and China (10+1),emphasized that both sides should deepen co-operation in

key areas, such as agriculture, information and telecommunications, human resources

development, mutual investment and the Mekong River Basin development, and

earnestly implement long and medium-term co-operation programs 12.

a)Co-operation in Information and Communications Technology (ICT): OnOctober 6 2003, China and ASEAN economic ministers and information ministers

signed the memorandum of understanding at Bali, Indonesia, which opened the new

page of mutually beneficial co-operation among countries in this area. The

memorandum contains human resources development, information infrastructure

development, technology development, ICT application development, e-ASEAN

Projects implementation, exchange of information, etc. And these Parties will hold

annually, or as often as required, the ASEAN-China Seminar on ICT.

b) Co-operation on the development of Mekong River Sub-region: On August 19

2003, the fifth ministerial conference13 was held to talk over ASEAN- Mekong River

Basin development and co-operation, where Chinese Government expressed that it

would strengthen the co-operation with Lancang River - Mekong River sub-region

countries in each field and construct Lancang River - Mekong River Sub-region as the

demonstrative area of China-ASEAN FTA. On April 30 2004, to strive for the

facilitation of transportation in the greater Mekong River sub-region composed of 6

countries, at the first session, Chinese Government signed the phase 1 annexes andprotocols of the Agreement for Facilitation of the Cross-Border Movement of Goods

and People in the Greater Mekong Subregion. Chinese Government has already

established a committee including such five departments as public security, quality

testing, customs, traffic and diplomacy, to promote the fulfillment of the facility of

transportation as soon as possible.

12 Joint Declaration of The Heads of State/Government of The ASEAN and The Peoples Republic of China onStrategic Partnership for Peace and Prosperity, http://www.aseansec.org/15265.htm13 The ministerial conference of ASEAN-Basin of Mekong River, initiated in 1996, is an important economiccooperation mechanism in the Basin of Mekong River at present, which is composed of 10 ASEAN members andChina.

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c) Promotion of traffic convenient co-operation: China and ASEAN support

actively the construction of pan-Asian railways and roads. The joint statement of 2nd

ASEAN Transport Ministers Meeting-China in Rangoon Burma on October 25 2003,

show that building an integrated transport network is a vital supporting

infrastructure to an China-ASEAN FTA. Both sides will draft a memorandum of

understanding on co-operation of the traffic of China-ASEAN, which will formalize

policy dialogues and cooperative programs between ASEAN and China in transport

infrastructure development and construction, maritime safety, human resource

development in maritime, and information exchange, etc. And both sides endorsed the

implementation of the initial joint projects and activities covering port management

and marketing, inland waterways regulation and joint table-top search and rescue

exercise.4Closer social co-operation between China and ASEAN

The most significant event of the social co-operations between ASEAN and

China is that the two sides fought against SARS hand in hand. At the informal summit

meeting of ASEAN and China held in Bangkok of Thailand in April of 2003, Joint

Statement of the Special ASEAN-China Leaders Meeting on the Severe Acute

Respiratory Syndrome (SARS) was released. And it announced that both sides will

expand the cooperative channel together, and regenerate the economy of various

countries, and rebuild the confidence of East Asia.Joint Declaration of the Heads of

ASEAN and China, in October 2003, aimed at strengthening public health

co-operation, setting up the 10+1 special fund for health co-operation, and starting

10+1 Health Ministers meeting mechanism. This declaration also emphasizes China

and ASEAN should take further active exchanges in science and technology,

environment, education, and culture as well as personnel exchange, and improve

co-operation mechanisms in these areas. And efforts will be also made to enhance

tourism co-operation and deepen understanding and friendship between the people oftheir countries. The co-operation of ASEAN and China in politics, economy, regional

safety, social culture, etc., will deepen further, and will play a positive role in the

economic and social development and regional safety of both sides.

Part Four

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Developmental Trend and Prediction of China-ASEAN FTA

Since the start-up of China-ASEAN Free Trade Area, it has impelled the further

development of economic and technological co-operation between China and ASEAN,

and is taking on a better trend of development. According to the present situation,

China-ASEAN Free Trade Area will continue to extend itself from the following

aspects in the future.

Trend One: Political driving force will develop into one of the main forces to

impel China-ASEAN Free Trade Area.

Generally speaking, both China and ASEAN are developing countries with a

relatively low development level. Besides, there still exist differences between China

and ASEAN in such aspects as economic developmental level, economic system, laws

and regulations, etc. Therefore, it seems to be unworkable between China and

ASEAN to set up free trade area in the near future from a traditional point of view.

However, facing the risks of globalization, Chinese government and member

governments of ASEAN have realized that it is impossible to maintain economic

security and stability only by depending on their respective power and that it is

necessary to establish regional economic co-operation in order to lower the risks

arising from economic globalization. Taking this factor into consideration, it is quite

likely for Chinese government and member governments to promote the developmentof the FTA by political power when necessary.

Since China-ASEAN Free Trade Area started, there have been frequent

reciprocal visits at a high level between China and ASEAN. As a result, both sides

settled many disputes peacefully through negotiations, made some common

understandings constantly among international affairs, and strengthened political

mutual trust and security co-operation constantly. In 2002, China and ASEAN signed

The Action Declaration of Each Side of the South China Sea to ensure the peace and

stability of the South China Sea Area. In October of 2003, China formally joined The

Southeast Asian Treaty of Friendship and Co-operation, indicating that China is a big

regional country that shoulders the responsibility. Meanwhile, Chinas entry also

helped to improve the status and strengthen the influencing power of ASEAN at an

international level. ASEAN and China also signed Joint Declaration of the State

Leaders between PRC and ASEAN in October of 2003, announcing that China and

ASEAN established a strategic partnership for peace and prosperity, further

strengthened mutual trust by taking Chinas entry into The Southeast Asian Treaty ofFriendship and Co-operation as the starting point, carried out The Action Declaration

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of Each Side of the South China Sea by discussing and planning the specific means,

fields and programs of the subsequent action, and kept consultation and negotiation

on the Protocol of Chinas entry into Southeast Asia Nuclear-free Zone Treaty. It is

doubtless that the good political relations between China and ASEAN will advance

the process of establishing free trade area.

Trend Two: The economic co-operation between China and ASEAN will drive

the development of economic co-operation in the whole East Asia, and extend to other

countries in East Asia gradually.

After the Asian financial crisis of 1997, China, Japan, South Korea and ASEAN

advocate strengthening the regional co-operation of East Asia, in order to cope with

the new financial impact that the economic globalization has brought about by

integrating the power of regional groups and to realize the co-win of economicco-operation. In October of 1997, the cooperative mechanism among ASEAN, China,

Japan and South Korea (10+3) came into being. This cooperative mechanism fully

covers the benefit of each side especially that of medium and small countries on the

basis of the original co-operation of ASEAN, develops a school of its own among the

regional co-operation mechanisms, and becomes the biggest inter-government

cooperative mode in Asia14. The start-up of China-ASEAN FTA has promoted the

process of economic co-operation of East Asia further, and accumulated the

experience with demonstrative value for closer co-operation for all economies in East

Asia.

While advancing the process of China-ASEAN FTA actively, ASEAN advocates

that such big countries as China, Japan, and USA, etc. are supposed to be involved in

it multilaterally, and insists that it set up free trade area with China, Japan and South

Korea respectively in order to form the balanced pattern of triangular strategy within

the area. At present, the consultation and negotiation of free trade between ASEAN

and Japan, between ASEAN and South Korea are going on like a raging fire, whichwill lay the foundation for the establishment of the whole East Asia Free Trade Area.

Trend Three: The rapid development of China-ASEAN FTA will promote the

cooperative field to extend to such areas as finance and currency co-operation

progressively, and impel the stagnant monetary co-operation of East Asia.

After the start-up of China-ASEAN FTA, trade within the area will be expanded

rapidly, which will inevitably lead both sides to go on more co-operation on credit

payment and settlement. On the other hand, facilitated investment can also increase

14A New Pattern of Regional Economic Cooperation in East Asia: China-ASEAN Free Trade Area, Research on

Financial and Economic IssuesNo. 6 2002, PP.49-52

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financial exchanges of both sides. In this case, the co-operation between China and

ASEAN will extend progressively to such fields as finance and money etc.

The co-operation of financial field, especially monetary co-operation, will reduce

transaction cost of member countries in China-ASEAN FTA, promote production

factors to flow freely in the whole trade area, and thus impel the development of

China-ASEAN FTA further.

In addition, the further co-operation between China and ASEAN can also bring

the potential political benefit to every member country; the deepening of economy

interdependence within the area is advantageous to maintain the security of this area;

the deepening of co-operation within the area is also favorable to increase the

economic and political weight of Asia among international affairs. In a word, the

establishment of China-ASEAN FTA is not only of crucial importance to thedevelopment of this area, but also of strategic significance to the peace and security of

this area.

Though the cooperative road of10+1 is also zigzag, united China and ASEAN

will make great efforts to establish the inter-country trust, to guarantee the unity and

peace within the area, and thus to realize the common goal of development.

References

1. Qi Huan and Du tao,Review of the Development of Political and Economic Relation beween

China and ASEAN in 2003, Journal of Yunnan University of Finance and Economics, Vol.19

3,PP.6-7

2. Chen Wen,ASEAN and Sino- ASEAN Free Trade Zone in 2003, Around Southeast Asia, No.1

2004, PP.39-45

3. Wang Qin, Progress and Prospect of China-ASEAN Free Trade Area, Journal of Xiamen

University (Arts & Social Science), No.1 2004, PP.85-93

4.

Framework Agreement on Comprehensive Economic Co-operation between the PeoplesRepublic of China and the Association of South East Asian of Nations, and Annexes 1-4,

http://gjs.mofcom.gov.cn/200212/

5. Group for Comparative Research of Multi-scheme for Regional Economic Co-operation, The

Development Research Center of the State CouncilNegotiations between one and ten:

Analyze the influencing factors and difficulties for China-ASEAN Free Trade Area, Intertrade,

No.8 2003PP.22-27

6. Wang Qin, The Status and Prospect of the Development of Economic and Trade Relation

between China and ASEAN, Southeast Academe Research, No. 5 2002, PP.75-79

7.

Research Group on Chinas WTO Accession and ASEAN Economies, Center for WTO

Studies, Xiamen University, On China-ASEAN Economic & Trade Relations After Chinas

15


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Accession to the WTO, Southeast Asian AffairsNo.1 2002, PP.1-6

8. Sun Yucong and Wu Dongmei, A New Pattern of Regional Economic Co-operation in East

Asia: China-ASEAN Free Trade Area, Research on Financial and Economic IssuesNo. 6

2002, PP.49-52

9. Zhang Xinwei, Status and Prospect of Investment in China from ASEAN countries ,

International Economic Co-operation, No.12 2003

10. Du Qunyang and Song Yuhua, The Effect of FDI in China-ASEAN Free Trade Area,

International Trade JournalNo.3 2004, PP.51-54

11. [Philippine] Fidel V. Ramos,Research onChina-ASEAN Free Trade Area, World Economics

and PoliticsNo.1 2004, PP.61-64

12. ASEAN-China Expert Group on Economic Co-operationForging Closer ASEAN-CHINA

Economic Relations in the 21 Century

Working Paper

October 200113. H.E. Ong Keng Yong Securing a Win-Win Partnership for ASEAN and China

http://www.aseansec.org/16255.htm

14. Pengiran Mashor Pengiran AhmadASEAN Plus Three Perspectives of Regional

Integration in East Asia and the Lessons from Europe November 2003

http://www.aseansec.org

15. Sheng Lijun China-ASEAN Free Trade AreaOrigins, Developments and Strategic

MotivationsISEAS Working PaperInternational Politics & Security IssuesSeries No.

1(2003)

16. Thitapha Wattanapruttip, ASEAN-China Economic Relationships and Co-operation in Trade

and Investment: Patterns and Potential, Presented at the Symposium on China-ASEAN

Entrepreneur Exchanges, Chengdu, China, October 2001from http://www.aseansec.org/

Attachment Table ASEAN-China Trade and Investment Interaction

Area ASEAN 1/ China 2/

16
http://www.aseansec.org/16255.htmhttp://www.aseansec.org/http://www.aseansec.org/http://www.aseansec.org/http://www.aseansec.org/http://www.aseansec.org/16255.htm


17/17

1991 1995 2000 1991 1995 2000

1. Merchandise trade 3/

Total value (US$ billion) 343.8 675.6 795.0 135.8 281.1 474.3

ASEANs trade with China (% of total trade of ASEAN) 2.3 2.9 5.0 -- not applicable --Chinas trade with ASEAN (% of total trade of China) -- not applicable -- 5.8 6.9 8.3

2. Tourist arrivals (million)

Total number 11.7 17.7 22.6 9.5 16.1 19.8/4

ASEAN tourists in China -- not applicable -- 0.3 1.1 1.8

China tourists in ASEAN n.a. 0.8 2.3 -- not applicable --

3. Investment flows (US$ billion)

Total FDI outflows5/ 1.1 7.0 7.5 0.9 2.0 2.3

Total FDI inflows 6/ 13.2 24.8 13.4 4.4 35.8 40.8

5. Ratios of production to trade (%)

Trade/GDP 93.5 105.3 138.6 34.0 40.2 43.9

ASEANs trade with China/ASEAN's GDP 2.1 3.0 6.9 -- not applicable --

Chinas trade with ASEAN/Chinas GDP -- not applicable -- 2.0 2.8 3.7

Resource Compiled from database of IMF, International Financial Statistics and Direction of Trade

Statistics; of ASEAN National Tourism Organizations and World Tourism Organization; from

UNCTAD, World Investment Report, various issues; from ESCAP, Economic and Social Survey of

Asia and the Pacific, various issues; and from ADB, Development Outlook and Key Indicators of

Developing Asian and Pacific Countries, various issues. This Table is from 16th reference.

Notes:

1 Brunei Darussalam, Cambodia (from 1999), Indonesia, Lao PDR (from 1999), Malaysia, Myanmar

(from 1997), Philippines, Singapore, Thailand and Viet Nam (from 1995)

2 Excluding the Special Administrative Region of Hong Kong.

3 Both exports (f.o.b.) and imports (c.i.f.).

4 1999.

5 Indonesia, Malaysia, Philippines, Singapore and Thailand only.

6 Same as above plus Viet Nam.

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26-progress of the china-asean free trade area

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