Development of China-ASEAN Economic and Trade Relations under the Belt and Road Initiative

By Li Ruihua,Hu Wenxiu

In 2020， ASEAN became Chinas largest trading partner， marking the formation of a new pattern of regional economic and trade cooperation in which China and ASEAN are each others largest trading partners. The proposal and construction of the Belt and Road Initiative has initiated new concepts， new mechanisms and new platforms into the development of economic and trade relations between China and ASEAN， ushered in broad prospects for the development of China-ASEAN economic and trade relations， and accelerated the course of China-ASEAN economic and trade cooperation.

Development of China-ASEAN economic and trade relations

From 1991 to 2020， the development of China-ASEAN economic and trade relations has risen from a comprehensive dialogue partnership to the largest trading partnership. The development course in the first 20 years is shown in Table 1：

Since 2011， the China-ASEAN Free Trade Area upgrading its development， and in the meantime ASEAN put forward the Agreement on Regional Comprehensive Economic Partnership（RCEP）. Since then， China-ASEAN economic and trade cooperation carried out under negotiations of two free trade area agreements： one is the completed China-ASEAN Free Trade Area and its updated version； the other is the RCEP agreement.

Formal negotiations began in 2012 with the participation of 16 Central Asian countries in the RCEP Agreement. From 2013 to 2020， there were three leaders meetings， 19 ministerial meetings and 28 rounds of formal negotiations. Finally， in November 2020， 15 member states except India formally signed the agreement， completing text negotiations of the RCEP agreement and substantive negotiations on market access.

Negotiations on upgrading the ChinaASEAN Free Trade Area were launched in 2014， the outcome document was signed in 2015， and officially took effect in 2016. In 2017， Premier Li Keqiang proposed upgrading the “2+7 cooperation framework” put forward in 2013 to the “3+X cooperation framework” for guiding China-ASEAN economic and trade relations， with a broader range of areas and a deeper level of cooperation. In November 2018， China and ASEAN announced the China-ASEAN Strategic Partnership Vision 2030， marking the implementation of the upgraded version of the China-ASEAN Free Trade Area.

Since then， under the implementation of the“upgraded” version of the China-ASEAN Free Trade Agreement， the development of China-ASEAN economic and trade relations has entered a new stage， the course of economic integration has been accelerated， and economic and trade cooperation has achieved new leaps with remarkable achievements.

Status quo of China-ASEAN economic and trade relations

Development effect

First， the bilateral trade volume continues to rise. In 2020， the trade volume between China and the ASEAN reached USD 684.60 billion， up by 6.7% year on year. Among them， Chinas export to the ASEAN reached USD 383.72 billion， up by 6.7% year on year. Imports from the ASEAN reached USD 300.88 billion， up by 6.6% year on year. As shown in Figure 1， from 2011 to 2020， the total trade volume showed a continuous growth trend， except for temporary negative growth impacted by the global economic downturn in 2015 and 2016. At present， ASEAN has surpassed the United States to become Chinas largest trade partner.

Second， bilateral investment has increased substantially. According to statistics from the Ministry of Commerce， in 2020 Chinas direct investment in the ASEAN industry reached USD 14.36 billion， up 52.1% year on year； and ASEANs actual investment in China reached USD 7.95 billion， up 1.0% year on year. Since the establish- ment of the strategic partnership between the two sides in 2013， economic and trade cooperation between the two sides has become closer， and the sectors and amount of direct investment have continuously expanded. By the end of 2020， cumulative mutual investment between China and ASEAN exceeded USD 250 billion. From 2013 to 2020， Chinas investment in ASEAN increased from USD 6.17 billion to USD 14.36 billion， while ASEANs investment in China increased from USD 6.16 billion to USD 7.95 billion， showing an overall upward trend with a large increase in bilateral investment. ASEAN has become a key region for Chinas outbound investment.

Third， bilateral economic cooperation is getting closer. In recent years， the total amounts of newly signed contracts and completed turnover of overseas contracted projects have increased significantly. By the end of 2020， the total amount of newly signed contracts of Chinese enterprises in ASEAN exceeded USD 481.1 billion， and completed turnover exceeded USD 314 billion. In 2020， Indonesia， Thailand and the Philippines were the top three destinations for Chinas project contracting.

Development problems

First， non-tariff trade barriers are prominent. To be specific， China and ASEAN countries lack transparency in the inspection and quarantine system， technical standards， and conformity assessments， and there is a big gap between the two sides. Customs clearance procedures are burdensome， and some ASEAN countries have imperfect laws and regulations. Trade protectionism is on the rise， and safeguarding measures have begun to be taken on Chinas exports， and antidumping and countervailing duties are levied. According to statistics of the United Nations， non-tariff trade barriers in the 10 ASEAN countries totaled 5，975， among which technical barriers to trade （TBT） and sanitary and phytosanitary measures （SPS） account for the highest proportion， 43% and 33% respectively. Among some developing ASEAN countries， the proportion of imports covered by non-tariff trade barriers is even as high as 100%.

Second， bilateral trade frictions are frequent. According to statistics from the China Trade Remedies Information Network， from 2013 to the end of April 2021， China launched 14 anti-dumping investigations and one safeguard investigation against ASEAN， mainly involving Thailand， Malaysia， Singapore and Indonesia. ASEAN launched 54 anti-dumping investigations and 39 protective measures investigations against China， mainly including Thailand， Indonesia， Malaysia， Vietnam and the Philippines. These bilateral trade frictions have increased the cost of trade， narrowed the scope of trade and seriously affected the development of ChinaASEAN economic and trade relations.

Third， the trade structure is unbalanced. From the point of import and export products， ASEANs exports to China are mainly energy， minerals， agricultural products， plastic products and other primary products， but these products have low added value， such as restricted mineral resources exploitation and limited agricultural production. On the other hand， Chinas exports to ASEAN are mainly large equipment and spare parts， such as mechanical and electrical products， which have high added value. In addition， finished goods account for the largest portion in import and export products of the two sides， but China has more obvious advantages on ex-ports. In terms of trade types， China and ASEAN mostly focus on trade in goods and intermediate products， with a relatively low proportion of trade in services.

Belt and Road construction creates new impetus for ChinaASEAN economic and trade development

Due to the instability of the world economy and the rise of trade protectionism， new changes have occurred to problems in the course of development. The proposal of Belt and Road Initiative has created new impetus for the development of China-ASEAN economic and trade cooperation. With the help of a new concept， new platform and new mechanism provided by the Belt and Road Initiative， the two sides have conducted closer cooperation in commodity trade， project contracting， financial services and production capacity cooperation.

First， it brings new ideas. The new concepts of “consultation on the basis of equality，” “mutual assistance and joint contribution” and “openness and sharing” advocated by the Belt and Road Initiative will create new impetus into China-ASEAN economic and trade development. The concept of “consultation on the basis of equality” advocates equal status among countries as well as consultation and cooperation on projects， which has promoted political and strategic mutual trust and project cooperation between China and ASEAN countries. Under the principle of “mutual assistance and joint contribution，”China and ASEAN countries have strengthened policy communication， infrastructure connectivity， unimpeded trade and financial integration. A number of agreements on mutual assistance and joint contribution have been signed， which have helped China and ASEAN formulate common development plans and promoted trade between China and ASEAN. The concept of “openness and sharing”has provided new thinking for ChinaASEAN economic and trade cooperation， launched the construction of the China-ASEAN economic and trade cooperation zone and reduced bilateral trade frictions.

Second， a new mechanism has been formed. The implementation of the Belt and Road initiative has promoted the formation of a “decisionmaking and docking” mechanism， a“market-oriented operation” mechanism and a “transnational connectivity” mechanism between China and ASEAN， which has coordinated and solved the contradictions and conflicts in economic and trade cooperation. Under the framework of the Belt and Road Initiative， the Belt and Road work leading group， the China-ASEAN Connectivity Committee and the Belt and Road service organization have been established， forming the“decision-making and docking” mechanism. China has signed agreements with countries such as Brunei and Malaysia on aviation， shipping and investment cooperation， which deepened “connectivity” and established a market-based operation mechanism. In addition， such transnational cooperation mechanisms as the “ChinaASEAN port city network cooperation mechanism，” the “China-ASEAN city cooperation action mechanism，”the China-Indonesia transnational financial cooperation mechanism and the transnational connection mechanism for the China-Malaysia chamber of commerce are also being constantly established and improved.

Third， it provides a new platform. The Belt and Road has promoted the construction of the China-ASEAN infrastructure connectivity platform， unimpeded trade platform and financial integration platforms. In terms of infrastructure connectivity， China has set up “One Corridor” （China-Indo-China Peninsula Economic Corridor） and“One Network” （China-ASEAN Port Cities Cooperation Network）， which have opened up new prospects for China-ASEAN cooperation through resource integration， complementarity and mutual promotion. In terms of trade flow， international cooperation and innovation platforms have been set up， including the Digital Economy Industrial Park， the China-Malaysia Qinzhou Industrial Park， the MalaysiaChina Kuandan Industrial Park and the China-ASEAN Beidou Intelligent Industrial Park， focusing on the key areas of the Belt and Road Initiative， such as the digital economy and electronic logistics. In terms of financing， the Asian Infrastructure Investment Bank and the Silk Road Fund under the framework of the Belt and Road have provided financial support for project cooperation between China and ASEAN countries， which has promoted bilateral financial cooperation.

The Belt and Road Initiative supports an upgrade of ChinaASEAN economic and trade cooperation

The Belt and Road Initiative has promoted rapid development of ChinaASEAN economic and trade cooperation in terms of concepts， mechanisms and platforms. As the focus of the construction of the Belt and Road， five connections， namely policy communication， infrastructure connectivity， unimpeded trade， financial integration and people-to-people bond play an important role in strengthening political mutual trust， economic integration and cultural inclusiveness between China and countries along the Belt and Road. Hence China and ASEAN should also continue to promote economic and trade development through policy communication， infrastructure connectivity， unimpeded trade and financial integration in these five connections.

First， reduce trade barriers and trade frictions through policy commu-nication. On the one hand， the “ASEAN Community Vision 2025” and the Belt and Road Initiative are both based on political， economic and cultural construction strategies， and China and ASEAN should jointly maintain and promote the signing and implementation of the RCEP by making use of this strategic point. On the other hand， China and ASEAN countries should uphold the principle of discussing， coconstruction and sharing， insist on opening up and cooperation， harmonious inclusion， mutually beneficial and win-win concepts， set up consultation and dialogue mechanism for the development of bilateral economic and trade， strengthen policy support in terms of tax， finance， customs， authentication and information， and formulate unified inspection and quarantine system and supply chain security standard as well as inspection standards. The government has jointly set up a platform for cross-border customs cooperation， conducted regulatory mutual recognition and information exchange & sharing with ASEAN countries， and created a favorable trade and investment environment for China-ASEAN economic and trade development.

Second， we should establish an international corridor facing ASEAN through infrastructure connectivity. The Master Plan on ASEAN Connectivity （2025） （MPAC2025） is based on sustainable infrastructure， and infra- structure connectivity is also a priority of the Belt and Road Initiative. China and ASEAN should accelerate cooperation on infrastructure connectivity such as railways， roads， ports， airports， power and communications with the help of the Belt and Road Initiative. On the basis of the existing economic corridor and construction of key projects， the introduction of foreign investment in infrastructure construction and the building of the ChinaASEAN multimodal transport union， China-ASEAN should， with an emphasis on Guangxi， push forward the construction of the gateway hub airport in Nanning for ASEAN to speed up construction of the outbound transportation network， initially forming an international gateway for ASEAN. At the same time， we should actively improve the China-ASEAN logistics system， speed up the construction of logistics channels， expand bilateral and multilateral trade and facilitate trade within the area.

Third， promote balanced development of trade structure through unimpeded trade. On the one hand， both China-ASEAN economic and trade development and the construction of Belt and Road put an emphasis on mineral resources， agriculture and information technology， but Belt and Road has broader areas of cooperation， so China-ASEAN should strengthen cooperation in new construction do- mains such as 5G， the Internet of things and artificial intelligence for the two sides and in the emerging industries such as biology， new energy as well as new materials. We should increase ASEAN countries export advantages in the high value-added products and promote the extension of supply chains and industrial chains to the medium-high end. On the other hand， China should use technology to improve the quality of export products， develop technology-intensive and capital-intensive industries， upgrade R&D and marketing of processing trade industries， extend the domestic value-added chain， promote the transformation of processing trade to high value-added and high-tech content and optimize the trade structure.

Fourth， promote bilateral financial cooperation through financing integration. Financial openness is the key to trade and investment liberalization and facilitation， China and ASEAN countries should make full use of the China-ASEAN Investment Cooperation Fund and the Asian Infrastructure Investment Bank under the framework of the Belt and Road Initiative， seek financial support from such financial institutions as the Asian Infrastructure Investment Bank， the Silk Road Fund， the Export-Import Bank of China and the China Development Bank in a bid to provide special loans and improve financing ability. We will use funds to promote bilateral connectivity， continue to improve multi-tiered intergovernmental financial cooperation mechanism， promote two-way cooperation among financial institutions in various fields， strengthen cooperation on the two-way flow of financial personnel， and promote financial market connectivity so as to achieve the “early harvest”of the upgraded China-ASEAN Free Trade Area.