China-Asean Free Trade Agreement: Shaping future economic relations

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 free 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.