China, ASEAN in creation of win-win situation

Updated: 2010-10-29 16:04
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HANOI - Woo Ser Chai, who is doing cosmetics business in Southeast Asia and owns factories in Malaysia and China, expected this year's profit to rise more than 10 percent.

After the establishment of free trade zone, Woo said, tariffs of cosmetics were greatly reduced.

"In the Philippines, for example, it was 60-65 percent lower," he said. "Customers now can enjoy a lower price of products and we businessmen are making a profit thanks to the free trade agreement."

He is now planning to expand his business to Vietnam and Indonesia next year to take advantages of the low tariffs. Lower tariffs also make Chinese engineering vehicles more popular in Southeast Asia markets.

In Vietnam, half-year sales volume of China's Dongfeng Liuzhou Motor Co Ltd has exceeded that of the past year and the company has expanded to new markets such as Indonesia, the Philippines and Myanmar.

Similar stories of win-win situations are being told in Southeast Asia after China and the Association of Southeast Asian Nations (ASEAN) launched the free trade agreement on Jan 1, 2010, which facilitated trade and investment between the two sides.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. With a population of 1.9 billion, China-ASEAN Free Trade Area (CAFTA) is the world's first free trade area established among developing countries and the world's third largest free trade area in terms of trade volume, only after the North American free trade area and the European free trade area.

Representing the first free trade area agreement signed by China, CAFTA provides zero tariffs on 90 percent of products traded between China and ASEAN and other favorable policies on trade and investment.

According to the Chinese Ministry of Commerce, China-ASEAN bilateral trade in the first nine months of 2010 jumped 44 percent year-on-year to $211.3 billion, from which a major part were the imports and exports of agricultural products under the CAFTA's zero-tariff arrangement.

Do Tien Sam, Director of the Institute of Chinese Studies under the Vietnam Academy of Social Sciences, said that ACFTA has promoted trade between the two sides in the context that both ASEAN and China experienced export decreases to major markets like the United States and European Union countries.

The establishment of the free trade area helps ASEAN and China reduce their dependence on the economies of the United States, Japan and Western European countries, according to Sam.

The expert said that the free trade area brings both opportunities and challenges to companies operating in the area. ASEAN companies should turn challenges into opportunities, actively upgrade the technology and enhance the management capacity to improve the quality of products. The free trade area is expected to create a win-win situation for both ASEAN and China, he said.

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ASEAN countries should make more efforts in tapping the Chinese market with large number of consumers and huge demands, said Sam.

China, with a population of about 1.3 billion, is an ideal place for companies of ASEAN members to do business. Teoh Kok Lin, managing director of Singular Asset Management, said while CAFTA reduced trade barriers between nations and creates more market opportunities, it also brings about fiercer competitions.

But such competition is of positive effect on the market, as producers endeavor to cut cost and boost competitiveness, said Teoh.

Li Dongrong, assistant governor of the People's Bank of China, the central bank, said in a recent event that the establishment of the CAFTA not only laid a solid foundation for the regional development of financial cooperation, but also signals great potential for future financial cooperation between China and ASEAN countries.

"Now the renminbi purchase and sales transactions are becoming more active and the bank settlement network is also expanding. These all make companies' investments easier and will promote mutual economic cooperation between China and ASEAN countries," Li said.