China–ASEAN economic relations after establishment of free trade area^*

* An earlier draft of this paper was presented at the 7th Southwest Forum & the first Lancang-Mekong Cooperation Think Tank Forum, 17–19 October 2016, in Pu'er City, Yunnan Province, China

ABSTRACT

This paper aims to contribute to an understanding about the major changes in China–ASEAN economic relations after establishment of the China–ASEAN Free Trade Area (CAFTA) in 2010. First, China's merchandize trade balance with ASEAN has shifted from deficit to surplus since 2012. This reflects China's improving comparative advantage in manufacturing production vis-à-vis ASEAN as a whole. Second, with China's wage hike, ASEAN investors can no longer take advantage of China's cheap labor force. Concurrently, China's investment in ASEAN has been increasing and become more diversified, ranging from energy to manufacturing and services. Singapore has remained the most important investment destination for Chinese investors and the largest foreign investor in China among ASEAN countries. Third, China has comparative advantages in providing construction, telecommunications, computer and information services and other business services to ASEAN. On the other hand, ASEAN, led by Singapore, has opportunities in the financial services and tourism markets in China. Finally, the development of economic regionalism, notably the Regional Comprehensive Economic Partnership and Trans-Pacific Partnership, will remain critical for the CAFTA's relevance in regional economic integration, as well as China–ASEAN relations in the future.

KEYWORDS:

• China-Association of Southeast Asian Nations Free Trade Area (CAFTA)
• Regional Comprehensive Economic Partnership (RCEP)
• Trans-Pacific Partnership (TPP)
• China–ASEAN trade in goods
• China–ASEAN trade in services
• China's investment in ASEAN

Acknowledgments

The author would like to thank the two anonymous reviewers for their insightful comments and suggestions.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

* An earlier draft of this paper was presented at the 7th Southwest Forum & the first Lancang-Mekong Cooperation Think Tank Forum, 17–19 October 2016, in Pu'er City, Yunnan Province, China

Additional information

Notes on contributors

Min-Hua Chiang

Dr Chiang Min-Hua is research fellow at the East Asian Institute (EAI), National University of Singapore. She obtained her PhD in economics from Université Pierre-Mendès-France, now part of Université Grenoble Alpes, in 2008 (avec la mention: Très honorable avec félicitations du jury). Before joining EAI, she held research positions at the Institute of International Relations, Chengchi University (2009), Taiwan External Trade Development Council (2009–2010) and Commerce Development Research Institute (2010–2011) in Taipei. Her research interests include Asia-Pacific regionalism, trade and investment, issues related to economic growth and development in East Asia. Her most recent publications are China–Taiwan Rapprochement: The Political Economy of Cross-Strait Relations, Routledge, London in 2016 and Contemporary South Korea economy: challenges and prospects, World Scientific, Singapore in 2017. She is currently editing a special issue: ‘New wave of economic globalization: development opportunities and challenges for countries in the Global South’ for Bandung: Journal of the Global South (https://bandungjournal.springeropen.com/newwaveeconomics). For more on her research interests, follow on Twitter (https://twitter.com/MHChiang628) or Research gate (https://www.researchgate.net/profile/Min_Hua_Chiang).