Asean’s trade relationship with China has reached a crucial turning point with the latest 2015 figures showing a 3pc contraction, making it necessary to quickly conclude the Regional Comprehensive Economic Partnership agreement, according to a top Chinese think-tank.
Zhang Yuyan, director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, said after his presentation entitled China’s Economy in Global Context’ at Siam Commercial Bank’s headquarters on Monday that it was now imperative for China and Asean member countries to speed up the RCEP negotiations in order to upgrade economic relations to the next level.
The RCEP covers investment and other aspects of economic relations, in addition to the current trade in goods.
According to Zhang, the current free-trade agreement between China and Asean countries is still significantly underutilised, reaching only 6pc of its full potential, compared to the 60pc utilisation rate of the North American Free Trade Agreement (Nafta).
Figures from China’s customs authorities show that imports and exports between China and the 10 country Asean grouping dropped 3pc to about $460bn last year, representing the first decline since the 2008 global financial crisis.
In other words, Chinese-Asean trade in goods has peaked and the economic relationship has to move to the next stage of partnership, which means the RCEP framework.
A top Chinese think-tank says it is now imperative for China and Asean member countries to speed up Regional Comprehensive Economic Partnership negotiations in order to upgrade economic relations to the next level
He said China and the Asean member states should wrap up the RCEP negotiations and cut a deal by the end of this year, in order to broaden and deepen the economic relationship between the two major trade and investment areas.
Asked if the latest South China Sea quarrels between China and the Philippines as well as other territorial claimant countries in Asean would further delay the RCEP agreement, the think-tank’s director said politicians needed to discern economic benefits from the ongoing political conflict.
Asean groups together Thailand, Indonesia, the Philippines, Malaysia, Singapore, Vietnam, Cambodia, Myanmar, Laos and Brunei.
At present, China is Thailand’s biggest export market, accounting for about 10pc of the Kingdom’s shipments. Thai exporters have also been negatively affected by the global economic slowdown, resulting in export sluggishness.
According to the International Monetary Fund, China’s economy will gradually slow down to a growth rate of 5.8-6.1pc per annum during 2016-2021.
Zhang said the Chinese economy had entered a ‘new normal’, marked by an L-shaped growth pattern and supply-side reforms of state enterprises, the labour market, its relaxation of the one-child policy, education-system improvement and emphasis on technology innovation.
In addition, he said, China would promote the ‘One Belt, One Road’ initiative to increase connectivity with Southeast Asia.
Over the next five years, transport and other infrastructure investment schemes in connection with Thailand, Vietnam, Myanmar, Laos and Cambodia are expected to be implemented, including high-speed railway projects in Laos and Thailand that will be linked with southern China, as well as economic zones and industrial parks along the route.
The China-led Asian Infrastructure Investment Bank and the Silk Road Fund are new mechanisms for regional cooperation to finance these infrastructure projects as the region moves from the dollar-dominated regime to a more multinational financial regime involving the Japanese yen, the Chinese yuan and other currencies for project funding, he explained.
Meanwhile, China’s outward direct investment to Asean countries has continued to rise, totalling $7.8bn in 2014, up from $7.2bn in 2013 and $6.1bn in 2012.
Besides the ‘One Belt, One Road’ initiative, China has also worked with Thailand and other Asean countries via the related Greater Mekong Subregion and Lancang-Mekong Cooperation mechanisms, he added.
Published in Dawn, Business & Finance weekly, August 29th, 2016