Opportunities, Challenges of High-Quality Development of China-ASEAN Economic and Trade Cooperation and Path Exploration

In October 2024， at the 27th China-ASEAN Leaders’ Meeting， the leaders of China and ten ASEAN nations announced the substantial conclusion of the China-ASEAN FTA 3.0 Upgrade Negotiations， and proposed that the two sides would strive to formally sign in 2025 the Protocol on Further Upgrading the China-ASEAN Comprehensive Economic Cooperation Framework Agreement and pertinent agreements under the Agreement. The upgraded version of the China-ASEAN FTA 3.0 has comprehensively expanded mutually beneficial cooperation in emerging areas of the region， strengthened integration and exchange of standards and regulations， and established institutional arrangements for high-quality development of regional economic and trade cooperation. This also marked a new stage of high-quality development of China-ASEAN economic and trade cooperation.

Necessity for Our Times of High-Quality Development of China-Asean Economic and Trade Cooperation

In the 1990s， comprehensive normalization of relations between China and ASEAN member nations happened， and since then China-ASEAN relations have been upgraded from dialogue relationship to comprehensive dialogue partnership， and then to strategic partnership and comprehensive strategic partnership， and economic and trade cooperation has become the cornerstone of China-ASEAN bilateral relations. With the changes in international and regional situation， the status of China-ASEAN economic and trade cooperation has continued to rise in China’s building a new development pattern and high-quality construction of Belt and Road Initiative （BRI）. Accelerating the high-quality development of China-Asean economic and trade cooperation has become a strategic choice for China’s foreign economic and trade cooperation under the new circumstances.

First， high-quality development of China-Asean economic and trade cooperation is the call of our times to respond to the changing international and regional situation. As the world has entered a new period of turbulence and change， geopolitical situation worsens， major-power strategic contest intensifies， anti-globalization is on the rise， protectionism becomes prevalent， where China’s foreign economic and trade cooperation is facing a new international situation and environment. At present， China-Asean relations are at the best stage in history， with economic and trade cooperation developing fast， cooperation in various fields deepening， but as reconstruction of global value chains speeds up， the United States（US）-led West has sought to decouple and cut off industrial and supply chains from China， seven ASEAN nations being included into the “Indo-Pacific Economic Framework” （IPEF）， and bringing about a series of new changes to China-ASEAN economic and trade cooperation. After its trade war on China broke out， the US intensified its trade investigation on ASEAN countries， and ASEAN customs authorities strengthened management of country of origin application process， posing challenges to Chinese companies operating in ASEAN countries for detour export to US market. Meanwhile， Chinese exports of goods had impacts on local products of ASEAN countries， impacting on local products， causing discontent of local companies， and arousing reaction from some of the ASEAN countries. Against this background， promoting China-Asean economic and trade cooperation towards a stage of high-quality development is conducive to addressing relevant problems， that is， solving problems of development with high-quality development.

Second， high-quality development of China-Asean economic and trade cooperation is an important path for China to build a new pattern of double domestic and international development cycles. Under the new domestic and international circumstances， China called for speeding up the construction of a new development pattern in which the domestic cycle is the mainstay and the domestic and international cycles mutually reinforce each other. In the international economic cycle， with accelerated restructuring of the global value chains， especially since the economic and trade friction between China and the United States occurred， China’s foreign economic and trade pattern has undergone new changes. In China’s foreign trade， the proportion of the United States， the European Union， Japan and South Korea has decreased， while the proportion of ASEAN has increased significantly. ASEAN countries have been China’s largest trading partner for four years running， while China has been ASEAN’s largest trading partner for 15 consecutive years. According to Chinese customs statistics， in 2023， the bilateral trade volume between China and ASEAN was US$911.72 billion， accounting for 15.9% of China’s import and export trade volume. Among the top ten Chinese provinces， ASEAN is the largest trading partner of five provinces of Guangdong， Jiangsu， Shandong， Fujian and Sichuan; among the top ten import and export trading Chinese cities， ASEAN is the largest trading partner of five cities of Shenzhen， Suzhou， Dongguan， Xiamen and Qingdao. Therefore， as a trading partner， ASEAN’s position in China’s international economic cycle is self-evident. Further promoting the high-quality development of China-Asean bilateral economic and trade cooperation is highly significant to the construction of a new development pattern featuring dual domestic and international circulations.

Third， high-quality development of China-Asean economic and trade cooperation will contribute to deepening and consolidating high-quality BRI construction. At present， the joint BRI construction has entered a new stage of high-quality development. China has put forward the strategic goal， key direction and development path of high-quality joint BRI construction in the next decade， that is， adhere to the principle of extensive consultation， joint contribution and shared benefits， to that of open， green and clean development， and to that of high standards for people’s livelihood and sustainability in promoting high-quality joint BRI development to go deep and stable. ASEAN is one of China’s most important neighborhood regions and also a priority direction for high-quality joint BRI construction. Among all the countries and regions of joint BRI construction， ASEAN ranks first in its overall economic scale， import and export trade and absorption of foreign direct investment. In the import and export trade between China and all other BRI countries， China-ASEAN bilateral trade accounted for 32.9%; among China’s top ten trading partners， six are ASEAN countries; and from 2013 to 2023， ASEAN’s direct investment in China accounting for 52.1% of that of all other joint BRI construction countries in China. At the end of 2023， China’s direct investment in ASEAN countries accounted for 52.4% of all its direct investment in all other joint BRI construction countries， seven of the top ten countries in terms of investment stock being ASEAN ones. Being the first FTA established by China abroad， China-ASEAN FTA not only highlights the comprehensive effect of trade and investment， but also stands for an example of “south-south cooperation” in regional economic integration.

Opportunities and Challenges of High-Quality Development of China-Asean Economic and Trade Cooperation

With continuous upgrading of the China-Asean FTA， the two sides have kept expanding market opening， deepening economic integration， and accelerating industrial transformation and upgrade process， which provide market conditions， industrial space and institutional framework for high-quality development of China-Asean economic and trade cooperation.

First， a China-ASEAN super-large market provides market conditions for high-quality development of regional economic and trade cooperation. With rapid rise of China-ASEAN regional economies and accelerated development of regional economic integration， the region has gradually grown to be a super-large market of the world， its contribution to the world economy continuing to increase. In 2023， the joint gross domestic product （GDP） of China and ASEAN was US$21.7 trillion， and their import and export trade volume was US$9.4 trillion， jointly attracting a foreign direct investment （FDI） of US$387.56 billion. China and ASEAN countries respectively contributed 32% and 3% to world economic growth. At present， China and ASEAN are respectively the world’s second and third most populous country and region， the second and fifth largest economies， the first and fourth largest import and export trading entities， and the largest destinations of foreign direct investment in the world. At the same time， the influence of China and ASEAN economies is increasing. The World Bank research shows that every 1% drop in China’s GDP would lead to Indonesia’s GDP falling by 0.6%， Malaysia 0.7%， the Philippines 0.5% and Thailand 0.3%. At present， as the demand of the world market is insufficient， accelerated opening-up and integration of China and ASEAN markets， and particularly China’s strategic measures to promote high-level opening and high-quality development will bring huge market demand for high-quality development of China-ASEAN economic and trade cooperation， presenting a strong driving force for sustainable development.

Second， the industrial transformation and upgrade of China and ASEAN broaden industrial space for high-quality development of regional economic and trade cooperation. In context of the rise of the fourth Industrial Revolution， China and ASEAN countries have formulated strategic goals and policies for digital transformation and green transformation， and accelerated digital industrialization and industrial digitalization， as well as green and low-carbon transformation of energy structure and traditional industries. Entering the new era， China has put forward the strategy for two-wheel drive of digital and green economy and coordinated development， taking digital and green transformation as an important measure for high-quality development and industrial transformation and upgrade. At the same time， China has increased its investment in digital infrastructure， digital industries， new energy vehicles， renewable energy and other fields in ASEAN countries to build key projects of demonstration effect. ASEAN countries have introduced strategies and policies of “Industry 4.0”， digital transformation， green transformation and circular economy， such as ASEAN adopting the Consolidate Strategy on the Fourth Industrial Revolution and the ASEAN Digital Master Plan 2025， Indonesia’s Industry 4.0 Roadmap， Malaysia’s Industry 4.0 National Policy and New Industry Blueprint 2030， Singapore’s Blueprint for Industrial Transformation and its Green Plan 2030， Thailand’s 4.0 Strategy for Biological Economy-Circular Economy-Green Economy （BCG）， Vietnam’s National Strategy for the Fourth Industrial Revolution toward 2030 and its National Digital Transformation Programme by 2025. The digital and green-oriented industrial transformation and upgrade of China and ASEAN will bring new opportunities for high-quality development of regional economic and trade cooperation and greatly expand space for industrial development.

Third， the upgraded version of China-Asean FTA 3.0 establishes an institutional framework for high-quality development of regional economic and trade cooperation. The China-Asean Free Trade Area is the first free trade zone established by China abroad， which was completed in 2010 as scheduled. In 2015， the two sides completed the 2.0 version of the FTA Upgrade Agreement， which was fully implemented by 2019. At present， the negotiations on the upgraded version of China-ASEAN FTA 3.0 have been concluded. On the basis of the original China-Asean FTA and RCEP， the upgraded version of China-ASEAN FTA 3.0 includes nine areas， both covering existing fields and expanding emerging fields， which will further improve the quality and level of bilateral trade cooperation. Therefore， the upgraded version of the China-Asean Free Trade Area 3.0 will provide an effective policy framework and a strong institutional reassurance for high-quality development of bilateral economic and trade cooperation.

However， in context of accelerated restructuring of global value chains， high-quality development of China-ASEAN economic and trade cooperation also faces a series of new challenges as follows：

First， accelerated restructuring of global value chains may weaken the foundation of China-ASEAN economic and trade cooperation. China-ASEAN economic and trade cooperation is largely based on global value chains led by multinational corporations， and bilateral trade that comes from intermediate products trade accounts for more than 60% of all bilateral trade， as intermediate products trade mainly comes from value chain trade of multinational corporations. In 2008， reconstruction of global value chains began， and especially since the US waged a trade war against China， the US-led West has pursued “friend shoring” and “nearshoring”， and as a result， Western multinational companies as the main body have relocated some industries back home or to ASEAN countries thus changed their allocation of resources and regional layout， which necessarily erodes practical foundation of China-ASEAN economic and trade cooperation.

Second， the Indo-Pacific Economic Framework built by the US impacts China-ASEAN cooperation. In May 2022， the United States officially launched the Indo-Pacific Economic Framework （IPEF） negotiations， with ASEAN countries taking up half of its membership of 14 countries， and having signed three agreements on IPEF Supply Chain， Clean Economy and Fair Economy. The IPEF abandons the form of previous free trade agreements and tries to maintain and reshape the economic dominance of the United States in the Asia-Pacific region by building economic alliances with members within the framework， weakening economic and trade cooperation between China and ASEAN. The four pillars of IPEF target practical foundation and key areas of China-ASEAN economic and trade cooperation， and its implementation will have a direct negative effect on economic and trade cooperation between China and ASEAN. However， it is worthwhile to observe if IPEF will continue to work after the Trump administration taking office in 2025.

Third， the “l(fā)ong-arm jurisdiction” of the United States produces negative effects. In the name of fair trade， the United States has stepped up anti-dumping and countervailing investigations against ASEAN countries， and some competitive Chinese industries and overseas companies have become the focus of the investigation. For example， in April 2022， the United States launched an anti-circumvention investigation against photovoltaic products from Thailand， Malaysia， Vietnam and Cambodia. And in May 2024， it launched anti-dumping and countervailing investigations against solar cell products of the four countries above. In November 2024， the United States announced that it would impose tariffs from 21.31% to 271.2% on solar panels from the four countries， involving a number of Chinese companies going global .

In addition， due to slowing economic recovery of ASEAN countries， some countries are worried about increased import of goods from China after the implementation of the upgraded version of China-ASEAN FTA 3.0， and about impact on their local traditional industries， which in turn call on their governments strongly to adopt protective policies. As a result， some of the ASEAN countries have strengthened supervision on Chinese imports， increased value-added tax on inexpensive imports， and blocked some Chinese e-commerce platforms in order to protect their own small， medium and micro enterprises.

The Path toward High-Quality Development of China-ASEAN Economic and Trade Cooperation in the New Era

At present， fragmentation of the world economy is on the increase， and facing adverse currents， economic globalization stands for a severe test of sailing against tide， in which failing to progress means to retrogress. China needs to clarify the key adverse factors in developing high-quality China-ASEAN economic and trade cooperation， promoting transformation of traditional bilateral economic and trade cooperation， improving and innovating on economic and trade cooperative mechanisms， fostering new advantages of participating in international economic cooperation and competition， and making new contributions to building a closer China-ASEAN destiny community.

First， it is necessary to promote China-ASEAN economic and trade cooperation to upgrade from quantity to quality. For a long time， China-ASEAN economic and trade cooperation has increased in quantity. Since the completion of the bilateral FTA， due to reduced tariff and non-tariff barriers and the introduction of a negative list of service trade and investment， the scale and areas of bilateral trade and mutual investment， economic and technological cooperation between China and ASEAN had kept expanding and deepening. Under the new international and regional situation， it is urgent to accelerate transformation of the mode of China-ASEAN economic and trade cooperation， from pure increase of quantity to improvement of quality， deepening scientific and technological innovation， institutional innovation， and models and business format innovation in regional economic and trade cooperation， so as to enhance comprehensive competitiveness of regional economic and trade cooperation. In China-ASEAN economic and trade cooperation， it is necessary to focus on improving import and export quality， making regional production and supply chain more stable and innovative， coordinating investment in traditional and emerging industries， and the localization of foreign investment companies.

Second， it is necessary to speed up China-ASEAN regional connectivity and cooperation in emerging industries. On the one hand， under the framework of the China-ASEAN Joint Statement on Greater Synergy between the Belt and Road Initiative and the Master Plan on ASEAN Connectivity 2025， it is necessary to strengthen cooperation in regional land， sea and air network infrastructure construction， to promote the construction of the China-Thailand railway and the Malaysian East Coast railway， and to accelerate the construction of the new western land-sea corridor. On the other hand， on the basis of existing cooperation， it is necessary for China to further deepen cooperation with ASEAN in textile， building materials， light industry， processing and manufacturing according to the principle of China’s strengths in meeting the needs of ASEAN， to actively cooperate with ASEAN in emerging industries such as digital infrastructure， intelligent manufacturing， new energy， new materials and biomedicine， to help boost digital transformation of small and medium enterprises in ASEAN countries， to encourage new energy vehicles， lithium batteries and photovoltaic enterprises to set up factories in ASEAN countries， to develop renewable energy market， to create Chinese brand of regional industrial cluster effect， and to encourage and support “small but beautiful” livelihood projects to take root in ASEAN countries and continue to benefit local people.

Third， it is necessary to further stabilize regional industrial and supply chains. In context of accelerated restructuring of global value chains， on the one hand， it is necessary to effectively utilize the rules of upgraded “supply chain connectivity” of China-ASEAN Free Trade Area 3.0 and “accumulated rule of origin” in the RCEP to stabilize the existing regional industrial chain and supply chain. On the other hand， supported by the existing overseas economic and trade cooperation zones and industrial parks， it is necessary to gradually build a regional value chain led by Chinese enterprises in a planned manner， to foster forward and backward linkage between Chinese and ASEAN enterprises， and thus to consolidate the foundation for high-quality development of China-Asean economic and trade cooperation.

Fourth， it is necessary to expand and deepen institutionalized regional opening-up. Seizing the opportunity of upgraded version of the China-ASEAN Free Trade Agreement and implementation of the RCEP， it is necessary to achieve compatibility of rules， regulations， management and standards in the region according to high-standard international economic and trade rules， to promote linkage between regional rules and institutions and prevailing international rules and institutions， to gradually implement independent and unilateral opening-up to ASEAN countries gradually and progressively， to build in ASEAN a major channel and platform for opening， creating an international， law-based and market-oriented business environment， further reducing non-tariff regional barriers， conducting “one-stop-window” exchanges and cooperation with ASEAN countries， and putting in place pilot programs for “smart customs， smart borders， and smart connectivity” cooperation so as to further improve trade and investment facilitation.

Fifth， it is necessary to speed up localization process of overseas enterprises with Chinese investment. At present， there are more than 7，400 overseas enterprises with Chinese investment in ASEAN countries， employing more than 720，000 local employees. Although localization of Chinese enterprises in ASEAN countries has made headway， there remains a long way to go. It is necessary to study demand elasticity of export products， strengthen the preliminary feasibility analysis of investment in ASEAN countries， enhance safety of core and key industrial technologies， improve product quality to establish brand awareness， enhance core competitiveness of enterprises， and adhere to compliance operation. And it is necessary to avoid disorderly competition among enterprises with Chinese investment in ASEAN countries.

Wang Qin is Professor of School of International Relations at the Institute of Southeast Asian Studies of Xiamen University