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. 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. 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.