China-ASEAN FTA: First Participant, First Beneficiary
By Xu Ningning
The Dynamic Golden Belt
As the first FTA with China’s participation, China-ASEAN FTA forges the closest ever economic and trade ties between China and ASEAN. The unique economic cooperation regime also brings very close economic interest between China and ASEAN, which creates sound environment for enterprises to cooperate with each other.
Figures show that the investment and trade between China and ASEAN posted continuous growth during recent 10 plus years. The China-ASEAN trade volume marked an increase of 22% from the first 4 months over the same period of 2005. Leaders from China and ASEAN has reached consensus to set the goal of bilateral trade volume at U.S. dollars 200 billion in 2010. According to the growth rate of trade volume in recent 3 years, the U.S. dollars 200 billion will be accomplished in 2008. At the same time, by the China-ASEAN timetable, China and ASEAN countries will further reduce tariffs in the next three and half years and the tariff level of vast majority of products will be zero in 2010.
From the proposal of CAFTA to the implementation of Agreement on Trade in Service, it only takes five years during which China-ASEAN economy and trade developed vigorously with especially dynamic economic and trade exchanges. State leader exchanged frequent visits and raised their hope to accelerate the building of CAFTA. In the first half of June 2006, the minister of commerce Bo Xilai led a near 300-member delegation to visit the Philippines and hosted the Forum on Sino-Philippines Economic and Trade Cooperation. Philippines president Arroyo attended the forum and delivered a important speech. It’s the first high–rank forum receiving vigorous governmental support and active participation of enterprises in the history of bilateral economic and trade cooperation.
Malaysia stands as the second largest trade partner of China in ASEAN. During May 2006, for the first time, Malaysia-China Business Council organized a delegation to visit Zhejiang Province of China headed by Moussa, Ex-Vice-Premier, the Chairman of Malaysia-China Business Council with the participation of many Malaysian companies. In the second half of May 2006, Vice-Minister of Malaysia Ministry of Trade and Industry Rafidah Aziz led a 80 people delegation and visited Beijing, Shanghai and Hong Kong. During their visit in China, Seminar on China-Malaysia Business Opportunities was hosted with frequent communication between Chinese entrepreneurs and Rafidah Aziz.
Before, Malaysia Islamic Chamber of Commerce also organized a delegation to visit China, which served as an important cooperation to pave the way for China-Malaysia inter-enterprises cooperation and bilateral trade and supported Chinese enterprise to join Malaysian main business world. All this shows that China-Malaysia cooperation will expand into wider and deeper fields.
Related Chinese regions also conducted coordination with ASEAN to bring their geographic advantage into full play. Recently, the nine provinces (autonomous regions and cities under the direct administration of State Council) hosted a meeting with ASEAN business leaders in Kunming, China. At the meeting, it’s put forward that Pan-Pearl River Delta cooperation not only covers domestic cooperation, but also includes outward cooperation. The leaders from 9 members from Pan-Pearl River Delta and ASEAN business officials held constructive dialogue with prominent results.
The dynamics is demonstrated in the over 100 Chinese corporations’ floating in Singapore. More and more Chinese ventures conduct cooperation in energy and mine field and engage in basic establishment projects in relatively backward ASEAN countries. For instance, there are dozens of Chinese enterprises in Laos searching and exploring mines including both state-owned and private players.
The establishment of China-ASEAN FTA and bilateral market opening up are among the main causes of fast developing China-ASEAN economic and trade ties.
Win-Win is the Key
We shall solve the emerging problems during cooperation in order to complete China-ASEAN FTA in time.
First, ASEAN states still have concerns over the bilateral trade imbalance. Although most ASEAN countries realize the upcoming benefits for their economies because of the FTA, the main concern is possible over-inflow of Chinese products after the abolishment of trade barriers and tariffs. Many Southeast Asia people, such as Philippines and Laos ambassadors in China have put up similar questions.
Their concerns are mainly based on the decrease of China’s trade deficit in China-ASEAN trade and Chinese enterprises will rush to ASEAN to develop new markets when they realize the business opportunities there. With competitive low prices, Chinese products will strike some impacts to domestic goods. While generally speaking, the industry pattern and economic development level of China are better than that of ASEAN. To solve this problem, China should encourage more domestic companies to invest in ASEAN and improve export thereby in order to develop CAFTA and strike win-win situation.
Second, machinery and electric products esp. electro goods cover more than half of bilateral trade value. This indicates the change of trade pattern from previous dominant primary products to current dominant industry products esp. high and new technology products. But, in the view of producers’ property, 60% of the products are produced by foreign-funded enterprises. That’s to say, foreign-funded enterprises conduct the division of labor between China and ASEAN in electronic industry which poses potential risks to us. Once world electronic industry experience downturn, the trade volume between China and ASEAN will decrease.
Therefore, China-ASEAN trade shall expand to various industries and reach synergy among correspond industries to improve China-ASEAN ties.
First Participant, First Beneficiary
From the perspective of enterprises, there are some problems in existence.
Firstly and prominently, many enterprises don’t understand FTA rules and the timetable for the opening up of markets. Given this condition, some companies pay unnecessary tariff and reduce their competitiveness thereby. It’s advised that companies should get familiar with Trade Agreement on Goods under Framework Agreement on China-ASEAN All Round Economic Cooperation and follow related news.
Secondly, some enterprises don’t pay attention to ASEAN market. Many enterprises hold that Chinese market is huge enough and quite familiar to them and lack the strong desire to go global.
Thirdly, ASSEAN is not fully understood among people. As to many enterprises, China-ASEAN AFT is still a new subject, unlike the well-known WTO. Actually, participation of regional economic integration is an important component of China’s reform and opening up policy. It’s beneficial for Chinese enterprises to go global and develop trade with others. And many new changes happened in ASEAN countries bringing enormous business opportunities and the ASEAN integration process is gaining speed, which is inductive to Chinese enterprises’ new development in ASEAN.
Therefore, enterprises are not only required to understand WTO but also FTA. Then it’s possible to expand production, attain business opportunities and space for profits.
The year 2006 mark the 15 the anniversary of the establishment of China-ASEAN dialogue partnership and also the “Year of China-ASEAN Friendship”. It’s safe to conclude that China-ASEAN relations has entered its golden period, And enterprises shall realize this point and catch opportunities in advance to reap early harvest in the building of China-ASEAN FTA.