Experts: ASEAN free-trade accord is a win-win deal

By Zhang Jin (China Daily)
Updated: 2010-01-04 08:53
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The free-trade area with the Association of Southeast Asian Nations (ASEAN) is expected to increase the Chinese presence in the fast-growing market - which has attracted the world's major powers including Japan and the US - and accelerate the integration in East Asia, Chinese experts said yesterday.

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The world's largest free-trade area (FTA) in terms of population came into force on Friday, as most goods flowing across the borders between China and the 10 members of ASEAN attracted zero or little tariff. In terms of GDP, the FTA is only smaller than the European Union and North American Free Trade Area.

"ASEAN, as an emerging but huge marketplace, is attractive to all," said Fan Ying, a professor at China Foreign Affairs University.

The 43-year-old ASEAN now has 10 members: Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Laos, Myanmar and Cambodia.

The bloc, with a population of 600 million, showed strong resilience to the financial crisis and is recovering quickly from the worst economic woes in seven decades, Fan said.

"ASEAN is a big consumer and raw material supplier," she said. "It is a vital link of the world's industrial chain. Its role is growing as the world now needs a market to absorb rising production amid the economic recovery."

Japan and South Korea have established FTAs with the bloc in recent years, an initiative that has greatly boosted trade. Western countries such as the United States and the European Union countries also expressed intentions to expand trade with ASEAN. India, Australia and New Zealand are expected to jump on the FTA bandwagon, too.

"As a long-term trade power that has extensive businesses in the region, China cannot lag behind," Fan said.

Indeed, China has replaced the US as the third-largest trade partner for ASEAN, after Japan and the EU. ASEAN is China's fourth-largest trade partner.

Trade between China and ASEAN hit $166 billion from January to October last year, according to the Ministry of Commerce.

ASEAN Secretary-General Surin Pitsuwan believes that the formation of the FTA will definitely bring about a win-win situation.

"It will also serve as a catalyst for the development of the single market and production base," he said.

Chinese economists agreed and said the China-ASEAN FTA is another step toward the integration of China, Japan, South Korea and ASEAN, an informal bloc commonly referred to as "10+3".

And one sign of the growing integration will be the wider use of a single currency, most likely the Chinese yuan, said Yang Fan, a professor of economics at China University of Political Science and Law.

Although it is not fully convertible, the yuan has been widely used in border trade between China and neighbors such as Vietnam, Cambodia and Myanmar. And speculation has run high that the Chinese unit could become a regional currency before it plays a bigger role in global trade settlement and foreign reserves.

With the FTA in place, "Southeast Asia will first accept the renminbi," Yang said.

The yuan could flow freely in Southeast Asia in five years, because the currency has the potential to appreciate 20 percent as the Chinese economy continues to rise, he said.

But the FTA's significance goes beyond the economy, experts said.

"The FTA will cement economic ties between China and ASEAN, which paves the way for promoting political trust," said Shi Zhan, a researcher at China Foreign Affairs University.

Problems such as border disputes can be solved only when political ties are improved, he said. Some Southeast Asian nations have claimed sovereignty over some islands in the South China Sea which China considers its territory.