China and the ASEAN bloc of Southeast Asian nations signed an upgraded free trade agreement on Tuesday to offset hefty import tariffs imposed by US President Donald Trump’s administration on most countries.
China is seeking to strengthen its engagement with ASEAN (Association of Southeast Asian nations), a group with a collective gross domestic product of $3.8 trillion, as Trump’s tariffs destabilise the world’s economic order.
China’s Ministry of Commerce said in a statement that the upgraded agreement “fully reflects the solemn commitment of the two sides to jointly support multilateralism and free trade”.
The expanded version of a free trade agreement is aimed at countering protectionism from the United States, as emphasised upon by Chinese Premier, Li Qiang, who said his country’s close ties with the region underscored there being “strength in unity”.
“Unity is strength,” Li Qiang told an ASEAN-China summit meeting after the signing, stressing that closer cooperation could help overcome global economic uncertainties.
The signing of the ASEAN-China Free Trade Area 3.0 on Tuesday came on the final day of the annual ASEAN summit and related meetings. It was witnessed by Li Qiang and Malaysian Prime Minister, Anwar Ibrahim, who served as ASEAN chair this year.
The so-called Free Trade Area 3.0, is the third revision of the long-standing agreement between the two sides, which was first signed in 2002 and came into force in 2010. Negotiations on the upgraded ASEAN-China deal began back in November, 2022, and concluded in May this year.
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Improved market access
Beijing has sought to position itself as a more open economy, especially in the wake of sweeping import tariffs by the US administration, despite receiving criticism from other major powers for restricting export on rare earth and other critical minerals.
China processes more than 90 per cent of the world’s rare earths.
The latest agreement paves the way for improved market access in sectors like agriculture, digital economy, and pharmaceuticals between China and ASEAN. The free trade area covers a combined market of more than 2 billion people and lowers tariffs on goods, boosting flows of services and investment.
Two-way trade has surged from USD 235.5 billion in 2010 to nearly USD 1 trillion last year.
Both China and ASEAN are also part of the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trading bloc, covering nearly a third of the global population and about 30 per cent of global gross domestic product.
In fact, Malaysia hosted the first RCEP summit in five years in Kuala Lumpur on Monday.
All eyes on China-US meet next
With China and the US extending a trade truce via negotiators on the weekend, analysts are keeping their eyes peeled on Trump’s meeting with Chinese President, Xi Jinping, later this week in Seoul.
The prospect of a deepening trade conflict between China and the US has risked weakening economic growth worldwide. After Trump departed Malaysia on Monday, China pressed for increased economic cooperation in the region, saying trade needs to be more open.
“The world must not slip back to the law of the jungle where the strong prey on the weak,” Li Qiang had said on Monday at the East Asia Summit regional forum.
“We should more firmly uphold the free trade regime, create a high-standard regional free trade network, and vigorously and effectively advance regional integration.”
Southeast Asian political analyst Bridget Welsh said the upgraded pact between China and ASEAN would benefit both sides, especially in the areas of supply chains and sustainability.
“It also speaks to a global reality that non-US countries are coming together to strengthen trade relationships for their prosperity as a recoupling with the US is ongoing,” she said.
Officials agree the ASEAN-China Free Trade Area 3.0 is expected to broaden integration across the region by covering new areas such as digital trade, the green economy, sustainability and support for small and medium-sized enterprises, which make up the majority of ASEAN businesses.
The agreement is designed to make trade benefits more accessible, improve market entry for smaller players, streamline non-tariff procedures and lower regulatory barriers.
“ASEAN-China cooperation is important primarily because China has been ASEAN’s largest trading partner for many years. But one must also take note that ASEAN is now equally important to China, making it a two-way relationship in trade,” said Malaysia’s Trade Minister, Zafrul Aziz, on Sunday.
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