Abstract The China-ASEAN Free Trade Agreement has been hailed as a landmark pact in pushing for freer trade between China and the ASEAN countries. With the establishment of the tree trade zone, trade and investment between the Chinese and ASEAN economies are expected to increase significantly; but while the economic benefits are inexorable, the extent of gains derived from closer integration hinges on the Sino-ASEAN economic relationship, which is both complementary and competitive in nature. At the present stage of development, China and ASEAN are more competitive than complementary, given the similarity in their trade and industrial structures. ASEAN and China are also direct competitors for foreign investment, rather than significant investors in each other‘s economies. Despite these challenges, the prospects for bilateral trade to flourish are bright if both China and ASEAN can interlock their economies through deeper integration in the long term. At the ASEAN-China Summit in November 2000. Then Chinese Premier Zhu Rongji proposed the creation of a free trade area between China and the Association of Southeast Asian Nations (ASEAN) within l0 years. The China-ASEAN Free Trade Agreement (FTA). if materialized by 2010. is expected to mark a significant milestone in the future development of Sino-ASEAN bilateral economic relations. From China’s perspective. an FTA with ASEAN is just one of the few proposals to foster closer economic and regional cooperation between China and the Southeast. Asian countries. For ASEAN. an FFA with China offers the Southeast Asian states a useful route to overcome the disadvantage of smallness by pooling resources and combining markets. It is anticipated that with the establishment of the China-ASEAN FTA, an economic region of l.7 billion consumers will enjoy a regional gross domestic product (GDP) of US$2 trillion. while total trade is estimated to reach $1.23 trillion. FlAs are not a new phenomenon in today‘s global trading system. and to date, there are more than a hundred of such regional trading arrangements either in force or under negotiation? Within East Asia.3 the potential of expanding trade and investment between China and the ASEAN countries through an
FTA is huge. but so are the challenges that accompany greater economic integration. The initiative to foster closer economic linkages be- tween China and ASEAN brings numerous opportunities as well as challenges for the prospective member countries. An economically resurgent China in pursuit of an open-door policy would be an engine of growth for the region, but it is also likely to have a disruptive impact on the Southeast Asian states. besides being a locomotive for ASEAN‘s future economic growth. In fact. the extent of benefits derived from closer economic integration between China and ASEAN hinges on their evolving "dynamic" economic relation- ship. which is both complementary and competitive in nature. The extent of the impact for China and the individual ASEAN countries resulting from an PTA will differ depending on the industrial and trade structures, factors and resource endowments. as well as stages of economic development of each country.‘
The structure of this article is as follows. The first section studies the modality and theoretical framework of the China-ASEAN FTA. The next section examines the pattern of trade between China and ASEAN. The third section analyzes the economic structures of China and the ASEAN countries. and their underlying implications. The final section contains some concluding remarks on the opportunities and challenges arising from an FTA be- tween China and her Southeast Asian neighbors.