New rules for upgraded cooperation

This year marks a significant milestone: 35 years since China became a dialogue partner of the Association of Southeast Asian Nations. Back in 1991, trade between China and ASEAN was less than $8 billion in a year. Today, that figure has surged past $1 trillion, with China and ASEAN consistently being each other's largest trading partners for several consecutive years.

The 35th anniversary is also a turning point for the relationship. For decades, it was built on opening markets to each other's goods. The next phase will be more complex: formulating shared rules for the digital and green industries that will define the region's future.

That first phase is largely complete. The China-ASEAN Free Trade Area, in force from 2010 and upgraded in 2015, and later the Regional Comprehensive Economic Partnership, reduced tariffs to the point where most goods move between China and Southeast Asia duty-free or nearly so. With relatively little tariff liberalization left to pursue, the focus of economic integration has shifted from the border to regulatory measures.

That reorientation, from lowering barriers to shaping the rules, explains the China-ASEAN Free Trade Area 3.0 Upgrade Protocol. Signed in Kuala Lumpur in October 2025, it covers nine areas, including five new ones: the digital economy, the green economy, supply chain connectivity, competition and consumer protection, and support for smaller businesses. The industries that will drive the region's growth in the coming decade barely existed two decades ago, and the rules governing their cross-border trade are still being written. What China and ASEAN agree upon now will determine how the region trades for a generation.

The digital economy is a key chapter in the agreement. Southeast Asia has one of the world's fastest-growing internet markets, worth around $300 billion, with three out of five people shopping online and more than 60 percent of payments being digital. China has the scale, the mature payment systems and the platform expertise that this market can readily draw on. What keeps the two from connecting is not tariffs but fragmentation: an exporter must navigate a different rulebook for data, payments and customs in every market. The digital chapter aims to create interoperability, establishing a common set of rules for data flows, payments and online trade, allowing 12 separate national markets to function like one.

Clean energy presents a high-stakes opportunity. Southeast Asia is striving to industrialize while cutting emissions, and it needs affordable solar panels, batteries, electric vehicles and grid equipment to manage both at once. China's manufacturing base — the country produces more than 80 percent of the world's solar production and most of its EV batteries — has dramatically driven down the cost of these technologies. Solar module prices, for instance, have fallen about 90 percent since 2010, making solar among the cheapest sources of new power in much of Southeast Asia. The benefit flows in both directions: the region decarbonizes faster and more cheaply than it could on its own, while China gains a large, fast-growing market and capable partners for the next stage of innovation. The green chapter seeks to deepen that exchange into genuine collaboration — aligning the standards by which green goods are certified and traded, and opening room for joint production.

But this cooperation will not be sustainable if the gains concentrate at the top. Scale economies in digital and green industries naturally reward the largest players, which is why the agreement's provisions for small firms, fair competition and ASEAN's less-developed members matter. Rules that keep the door open for newcomers will convert an impressive trade figure into more broadly shared prosperity.

Despite the focus on new industries, traditional trade retains its place. ASEAN is China's main supplier of tropical fruit, and China the largest market for the region's farm exports — providing steady income for growers across Southeast Asia and demand at a scale that no other domestic market can match. The new economy is being layered onto the old, not substituted for it.

These specific gains underscore a broader point about ASEAN's approach. ASEAN has always set the terms of its own engagement, working with major economies while committing exclusively to none. Its relationship with China has deepened within that strategy to become one of its central pillars. In a global economy that grows less predictable each year, this strategy is an asset for both sides and their trading partners.

The immediate task is unglamorous but crucial: ratifying the Free Trade Area 3.0 and implementing it effectively. It is the first test of the Comprehensive Strategic Partnership, which turns five this year, and of a new action plan running to 2030. While reducing tariffs was relatively straightforward, the harder and more consequential work of crafting shared rules for industries that did not exist in 1991 is only now beginning.

The author served as the Secretary-General of ASEAN from 2003 to 2007 and is currently at the S Rajaratnam School of International Studies at Nanyang Technological University, Singapore.

The views don't necessarily reflect those of China Daily.