Rony Soerakoesoemah, senior economic officer of the ASEAN Secretariat, asserts that China’s economic development benefits ASEAN while the economic integration of ASEAN provides a huge market for China, achieving for both common benefits by means of cooperation.

Such opinions are given weight by the evident rapid growth in trade and investment witnessed since the launch of the FTA. The China-ASEAN trade increase provides traction to economic development on either side and brings solid benefits to their enterprises and people. The positive impetus to the development of world trade and to world economic recovery is foreseen.

China-to-ASEAN Trade in Deficit

China’s trade with ASEAN countries represents 9 percent of its foreign trade volume, a measure that has been increasing since the establishment of the China-ASEAN FTA in January. Xu Ningning, secretary-general of the China-ASEAN Business Council Chinese Secretariat, believes that within the year ASEAN will replace Japan as China’s third largest trade partner. In the first half of 2010, China’s imports from ASEAN amounted to US $71.9 billion and its exports to the region totaled US $64.6 billion, representing a year-on-year increase of 64 percent and 45 percent respectively. The rapid growth of imports has put China’s trade with ASEAN countries in a deficit of US $7.3 billion. “China is mindful of the economic growth and interests of ASEAN and is committed to making the FTA a win-win endeavor,” says Mr. Xu.

“China has maintained a trade deficit with ASEAN for a long time, and since the establishment of the FTA, that deficit has expanded,” says Lü Yusheng, president of the Guangxi Academy of Social Sciences. He believes that the deficit reflects the complementarity and growth potential of China-ASEAN trade and shows China’s policy of “befriending, accommodating and enriching neighbors” by “surrendering profits” has yielded concrete results.

Neav Chanthana, deputy governor of the National Bank of Cambodia, points out that the global financial crisis poses a severe threat to the sustainable development of the world’s economies, particularly to rising and developing countries. Many Asian countries, especially those that rely on foreign trade, turned to China – the center of the Asian sourcing network – after the crisis shrank their trade links with developed Western countries. Though China has also been hit by the world financial crisis as a result of its close trade relations with the United States, it has shown strong growth momentum and robust domestic demand, factors that make China a good remedy for broken trade links.

According to a report from the Kasikorn Research Center, a famous think tank in Thailand, the full implementation of the China-ASEAN free trade agreement has created a huge market for Thai products. In the first two months of 2010 Thai exports to China were 84.4 percent higher than in the same period of 2009, and China replaced the United States as Thailand’s largest export market. The report also points out that Thailand’s exports to China will not only benefit from the zero tariff arrangement under the free trade area framework, but also from the stable development and continuous growth of the Chinese economy.

Complementarity Trumps Competition

Initially some ASEAN members were concerned about their balance of trade with China following the launch of the free trade zone and zero-tariff policy. Professor John Wong, of the East Asia Institute affiliated to the National University of Singapore, has this to say about it: “Many labor-intensive Chinese manufacturers were in a competitive relationship with their ASEAN counterparts, for example, in the textile and garment sectors. Another irritant was the gravitation of foreign investment directly to China, which got on the nerves of ASEAN countries. Therefore some ASEAN members, such as Indonesia, began to feel uneasy when the Chinese economy took off in the 1990s. … Now you can see the China-ASEAN free trade agreement is absolutely a long-term win-win arrangement for both sides. As a matter of fact, fears about China’s rise on the part of some ASEAN countries have started to abate recently, thanks to their booming exports, facilitated by the China-ASEAN Free Trade Area. More to the point, China’s continuous economic growth has had a clear and unexpectedly positive effect on the economic development of ASEAN countries.”\