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AseanAffairs Magazine November - December 2010



China in Spotlight
The emerging role of China in the 21st century is a focal point for conjecture and a certain degree of apprehension in the world outside of China. Is China an ally, a competitor, an adversary or perhaps all three?


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David Swartzentruber




                                                       CHINA-ASEAN:BEYOND TRADE ?
“Asean Affairs'managing editor explores the long and complex relationship between China and the Asean countries.With the start of the China-asean Free Trade Agreement this year,what comes next?

An evoling role

 During the last half of the 20th century and into the current period, the relationship between China and the Asean countries has been marked by periods of friendship and animosity, trust and distrust.

Asean leader jion hands with China's Wen Jiabao (C) for the 13th SEAN-China Summit in Hanoi,the capital of Vietnam,Oct 29,2010.from L-R:Singapore's Prime Minister Lee Hsien Loong,Thailand's Prime Minister Abhisit Vejjajiva,China's Premier Wen Jiabao, Vietnam's Prime minister Nguyen Tan Duang and Indonesia's Coordinating Minister for Economic Affairs Hatta Rajasa.

Throughout this time China has matured through its period of revolutionary zeal and its role as a diplomatic outcast to become a full-fledged member of the international community. The visit of U.S. President Richard Nixon to China in February 1972 was a major breakthrough moment for China and touched off her acceptance into the international community.

Prior to that landmark event, however, Indonesia and Burma were among the first countries (in 1950) to recognize the new People’s Republic of China. Most of the other Asean countries did not establish diplomatic relationships with China until the 1970s. Some of this foot-dragging was undoubtedly caused by concern over China’s aggressive military posturing, as several Asean countries were members of the U.S.-backed regional alliance, SEATO (Southeast Asia Treaty Organization), from 1954-1977.

As U.S.-China relations improved, China took important steps to move closer to the Asean countries. In 1980 China stopped supporting Chinese insurgencies in the region and in 1989 China passed laws requiring Chinese abroad to adopt the citizenship of the countries of residence. This is important as, for example, Asean member Thailand has the largest population of Chinese-Thai residents of any of the Asean members.

Beijing’s official contact with Asean began in July 1991 when Chinese Foreign Minister Qian Qichen was invited to attend the 24th Asean Foreign Ministers’ meeting. This reaching out by China was in many ways an attempt to overcome the world’s condemnation and sanctions imposed after the June 4, 1989 Tianamen Square massacre. Since 1991 the relationship between China and Asean has blossomed, culminating in the China-Asean Free Trade Agreement.

At the same time, Asean has adopted a “hedging” policy by courting the U.S., particularly as China has been involved in the dispute over territory in the South China Sea. Four Asean countries plus Taiwan claim rights in the South China Sea: Brunei, Malaysia, Philippines, and Vietnam, which has appealed directly to the U.S. about the issue. Japan also has had numerous direct conflicts with China over territorial disputes in the South China Sea.

Asean’s hedging policy has been invigorated by the pro-active policy of the Obama administration, which has shown increased interest in Southeast Asia.

China-Asean Free Trade Agreement
Ten years after it was envisioned, the China-Asean Free Trade Agreement (CAFTA), the world’s largest free-trade area by population, came into effect on January 1. The agreement between China and the 10- country Association of Southeast Asian Nations (Asean) covers nearly 1.9 billion people. In terms of economic value, this is the third-largest regional agreement, after only the EU and NAFTA, the North American Free-Trade Agreement.

CAFTA will allow 90 percent of all goods -- that is, around 7,000 items traded between China and Asean countries -- to be zero-tariff in the six richest Asean countries. But the poorest four ASEAN members, Vietnam, Cambodia, Laos and Myanmar, will not need to cut tariffs to the same levels until 2015. Meanwhile, by 2015, duties on other “highly sensitive” commodities will be cut to no more than 50 percent, which would include toilet paper in China, popcorn in Indonesia, and snowboard boots in Thailand.

The level of free trade is short of the EU or NAFTA trade pacts. Many firms fear Chinese competition in various countries. Indonesia, which wanted to reopen parts of the deal, has not readied itself for freer trade. On the other side of the coin are Asean members Singapore, Malaysia, Indonesia and the Philippines that are four of China’s major trading partners. The trade pact also lacks a mechanism for the resolution of trade disputes.

The major goods China imports from Asean countries are intermediary goods such as machinery, minerals and fuels, plastics, fats and oils, rubber, and organic chemicals. China uses these imports to manufacture low-cost goods that are exported to the United States and the EU.

China has traresformed Cambodia's electrical distribution system.

In 2010 Asean traded more with both Japan and the EU than it did with China, and other important trade partners are South Korea, Australia and India. Prior to 2009, China-Asean trade expanded rapidly, with volume skyrocketing from US$78 billion in 2003 to US$231 billion in 2008. However, China-Asean trade in 2009 shrank 8 percent from the previous year, to US$212 billion, and it is expected to fall further this year.

There is growing nervousness that Asean could become China’s domain. Reportedly, every Asean leader to sit with President Obama during his Asia trip asked questions about trade, and they all hope for a more active American presence in the region to strike a balance so that the Asean countries would not be pulled into a Chinadominated landscape.

Other signs of edginess are also appearing in news reports from the region such as the “Chinaization” of villages in southern Laos, adjacent to Thailand, as Chinese traders make their presence felt. The future of CAFTA may well lie in how the Chinese economy can absorb the manufactured imports of the Asean countries rather than just intermediary goods...............................


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