PROMOTION OF TRADE AND FOREIGN DIRECT INVESTMENT (FDI) BY ASEAN TO PEOPLE'S REPUBLIC OF CHINA (PRC)

Abstract

In view of the People's Republic of China's (PRC) economic potential, ASEAN countries, namely Thailand, Malaysia, Indonesia and Singapore (henceforth known as the ASEAN-4) have been enhancing their economic relations with China since 1979. To this end, the four ASEAN countries' trade and investment policies have been acknowledged as an important driving force behind the countries' exports and outward FDI growth to China. Here, the author has compiled the ASEAN-4's trade and investment policies, and made a comparison of the policies with emphasis on why some countries' trade and FDI policies are more successful than others.

Though ASEAN's exports to China have registered tremendous growth, exports only accounted for a small share of the China's total imports. Hindered by the lack of complementarity between the economies of ASEAN ( except Singapore) and China, FDI is the alternative to enhance bilateral economic relations. Thus, to promote exports and FDI to China, each ASEAN country has designed policies to enhance its export competitiveness and outward FDI.

According to surveys done at the firm level, the consensus is that the government has played an important role in facilitating the development of trade and FDI to China. Nonetheless, the firms' decisions to invest in China are also dependent on their business strategies.