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CNA
10-06-2025
- Business
- CNA
‘Big game-changer': Can ASEAN's next-gen trade pact with China deliver on its promise?
The recently concluded negotiations for the ASEAN-China Free Trade Area (ACFTA) 3.0 upgrade - slated for signing in October 2025 - could be a game changer for businesses like his, said observers, citing how the updated agreement will focus on the digital and green economies, as well as supply chain cooperation. 'ACFTA 3.0 will modernise the agreement and open new doors in the digital economy, green economy and supply chain connectivity. It will redefine ASEAN-China economic relations through innovation and competitiveness,' said ASEAN Secretary-General Kao Kim Hourn, speaking at a conference held in Huangshan, China earlier in June. Analysts also said the agreement lands at a timely but delicate moment - as Southeast Asia grapples with both a retreat by the US from global trade and the ripple effects of China's export glut. Who stands to gain most from the upgraded deal? Much will depend on the fine print - and businesses across the region are watching closely to see whether it can live up to expectations after two years and nine rounds of negotiations. ACFTA 3.0: WHAT'S NEW - AND WHY NOW? First signed in 2002, ACFTA was China's first free trade agreement and ASEAN's first with a major external partner. For Singapore alone, the deal eliminated tariffs on nearly 95 per cent of exports to China, while expanding market access. The latest provisions under ACFTA 3.0 will cover new and enhanced regulations in areas like supply chain connectivity, competition and consumer protection. 'This is a much needed upgrade,' said Priyanka Kishore, founder and principal economist at Asia Decoded, a macro-consultancy providing advisory services to policymakers. '(Policymakers) have taken into account pandemic disruptions, which I think is very important and there's a focus on strengthening supply chain resilience in critical and essential goods,' Kishore added. 'These agreements are not just about lowering tariffs - they are about building long-term resilience, enhancing economic integration and enabling our businesses to thrive in a rapidly evolving global environment,' Kao said. Analysts also pointed to stronger commitments in emerging areas like the digital and green economies as ASEAN nations work towards sustainability goals. 'Areas like solar panels and batteries,' said senior analyst Lee Chi Him from the Economist Intelligence Unit (EIU). 'Indonesia's solar projects tend to have (a lot of) local requirements so for Chinese exporters, there will be limits in terms of what they can do in that market,' he said, adding that it will be interesting to see whether such non-tariff barriers are addressed. Lucas Myers, a research affiliate at George Washington University's Sigur Center for Asian Studies, noted that the new ACFTA provisions will carry both economic and geopolitical implications for China and its trade partners across Southeast Asia, especially as the US distances itself from regional trade frameworks. 'With an absent US uninterested in free trade, China believes it can position itself as the defender of regional multilateralism and the existing trading system,' Myers told CNA, adding that ACFTA 3.0 will deepen China-ASEAN relations, 'handing Beijing more leverage'. 'In doing so, China can weaken US' influence (in Southeast Asia) and ensure that it usurps the role traditionally played by Washington.' Others agreed that the pact sends a strong geopolitical message - but have also urged caution. 'It's coming at a tricky but opportune time (for overseas markets) looking to de-risk slowly from the US,' said Kishore. She noted that the upgraded pact 'comes at the right time' to strengthen the region's integrated push - but added that Southeast Asia will also need to tread carefully in managing concerns over Chinese industrial overcapacity spilling into the region. '(ASEAN member states) are aware that there is a challenge to the local industries from Chinese goods that are coming in,' said Kishore. UNEVEN GAINS: WHO BENEFITS MORE? If ACFTA 3.0 is a bridge to the 'economy of the future', as several analysts described it, then not all ASEAN countries are starting from the same bank. Some, like Vietnam and Thailand, are poised to gain early. 'Vietnam and Thailand are increasingly destinations for Chinese companies to invest in manufacturing, and this deal's supply chain provisions will only boost their attractiveness for Chinese investors looking to offshore,' said Myers. There will be 'a real opportunity for Singapore and Malaysia' to deepen their roles as hubs in the regional digital economy, Myers added. Singapore, Kishore noted, has been 'one of the fastest growing areas (in the region) in terms of its digital economy'. 'It has one of the fastest growing exports of digitally deliverable services in the world and China is one of its key partners, a lot of FinTech exports happen between Singapore and China so it's definitely an important area.' EIU's Lee said Singapore, Malaysia and Thailand have 'been benefiting a lot from trade with China already'. 'In this context, they will benefit from the economic integration in terms of ease, trade, as well as better protection for investments and investors'. Kishore also warned of a long-term risk for Thailand. The kingdom's manufacturing prowess - spanning steel mills, cable factories and EV component plants, has made it a focal point for Chinese green-economy investments, even as the nation imposes anti-dumping duties on steel to protect local producers. 'The risk, which is actually playing out in Thailand (now), is Chinese investments come in … help develop the green economy, but knowledge transfers do not happen,' she said. 'So it ends up being dominated by Chinese manufacturers in these New Age industries but you don't build domestic capabilities.' Myers signalled the risks to ASEAN's companies and industries 'if Chinese firms come to dominate and crowd out smaller Southeast Asian businesses'. 'There are also worrying signs that the deal's primary beneficiaries will be large Chinese firms that are already dominant in 3.0's target sectors, like electric vehicles (BYD) and digital infrastructure (Huawei),' said Myers. Smaller and less-developed economies like Cambodia, Laos and Myanmar, would not stand to gain as much, Lee, the senior analyst from EIU said. 'They are at very early stages in terms of development and do not necessarily have very sophisticated exports that can go to China.' But on the other hand, technology transfer, technical cooperation and assistance could prove very beneficial for those countries, Lee added. 'We also know that the Philippines does not have the best relations with China, and in terms of the economy, (its goods and products) do not necessarily gravitate towards areas Chinese consumers are particularly interested in.' 'As it currently stands, the Philippines may not benefit a lot from ACFTA 3.0.' Since the ACFTA's implementation in 2010, data shows that trade between China and ASEAN has more than tripled, to US$696.7 billion in 2023 from US$235.5 billion. In the first four months of 2025, bilateral trade totalled 2.38 trillion yuan (approximately US$330.86 billion), reflecting a 9.2 per cent increase compared to the same period last year, according to data from China's General Administration of Customs. However, while China's share of ASEAN trade jumped from 12 per cent in 2010 to around 20 per cent by 2023, ASEAN's imports from China have surged far faster than its exports there, widening the bloc's trade deficit to over US$190 billion. 'China's market and capital are so disproportionately powerful that individual countries and their firms find it difficult to compete in a bilateral setting,' Myers said. 'And there are concerns that ACFTA 3.0 will enable China to deepen this imbalance in its favor over time.' ON THE GROUND: HOW SMES STAND TO GAIN Micro, small and medium enterprises (MSMEs) make up the backbone of ASEAN's economy, but challenges on the ground still remain, especially for smaller firms and start-ups struggling to navigate complex regulatory environments. 'Simplified streamlined processes and stronger grassroots implementation' will be critical going forward, ASEAN Secretary-General Kao said. 'Breaking that initial barrier of awareness and simplifying the process is really key,' said Lee, the Singaporean entrepreneur who also serves on an official MSME committee at the Singapore Business Federation. 'Practical, industry-specific support from government or trade bodies is something that is very crucial,' Lee added. 'And if paperwork seems too daunting, you wouldn't want to incur any associated costs (and) you'll just miss out on the advantages.' Yang Juejun knows the challenges of navigating complex regulations all too well. The company she works at, Suzhou Mega Plastics - which exports specialised medical and industrial cable polymers to countries like Thailand, Vietnam and Indonesia - has had to deal with regulatory hurdles across the region. Southeast Asia is one of the company's largest overseas markets by export volume, accounting for 40 to 50 per cent of its total export trade. 'One of the primary difficulties we face is product certification,' Yang, the company's board secretary, told CNA. 'Markets like Thailand and Vietnam enforce their own certification systems and we must undergo a separate domestic certification process, which adds both cost and time,' she said. Logistics and warehousing pose additional challenges. 'Establishing local warehousing facilities would involve substantial investment and operational complexity on our part,' Yang said. 'For these reasons, we are hopeful that the ACFTA 3.0 provisions will include policy support for companies with growing trade volumes in Southeast Asia.' 'We are expecting major green-energy investment projects in Southeast Asia to help sustain our downstream volumes and drive greater demand across the region,' she said. If ACFTA 3.0 aims to redefine the region's trade future, analysts believe what counts as success will vary - and so will the time needed to see it. Kishore of Asia Decoded emphasised that integration in new sectors must be matched by real outcomes. 'I would definitely look at how the digital economy integration has progressed between the two regions,' she said. Services trade offers one of the clearest benchmarks. 'We (ASEAN) do run a surplus with China on services,' she said, noting that opportunities may grow as ACFTA 3.0 streamlines digital rules. 'That's where the advantages could emerge - that we get more digital access to Chinese markets, but it's tricky for sure.' 'ACFTA 3.0 feels quite different,' said Lee, who feels that change could be 'truly transformative, really empowering businesses on the ground'. The real test of ACFTA 3.0 will be whether it enables more small businesses to act regionally from day one. 'Success would be measured by the number of MSMEs actively trading regionally, not just the total trade value dominated by large corporations,' he said. 'It's really seeing young entrepreneurs confidently looking at the entire region as the whole market from day one - because (they know) the systems truly support them.'
BusinessToday
08-06-2025
- Business
- BusinessToday
ASEAN Chief: Stronger Local Action, Simpler Rules Key To Unlocking Regional Trade Potential
Strengthening grassroots implementation, streamlining business processes and deepening public–private collaboration is critical to unlocking the full potential of regional trade agreements, said ASEAN Secretary General Dr Kao Kim Hourn at the 2025 RCEP Local Governments and Friendship Cities Cooperation Forum. Citing the Regional Comprehensive Economic Partnership (RCEP) and the ASEAN-China Free Trade Area (ACFTA) as key trade frameworks, Kao emphasised their complementary roles in expanding market access, enhancing supply chain resilience and boosting regional competitiveness. 'Public–private partnerships are essential not just for integrating businesses into regional value chains, but also in shaping more responsive policies,' he said, calling for greater support for micro, small and medium enterprises (MSMEs), which face persistent financing and regulatory hurdles. Kao urged local governments to drive progress through targeted outreach, advisory support and streamlined administration to help MSMEs thrive under these trade frameworks. He praised city-level initiatives that facilitate trade adoption via policy dialogue, capacity building and incentives, helping businesses navigate complex trade rules. RCEP, comprising 15 economies including all 10 ASEAN members plus China, Japan, South Korea, Australia and New Zealand, represented US$29.4 trillion in GDP (28% of global GDP) and US$13.5 trillion in trade (28% of global trade) as of 2024. ASEAN's trade with RCEP partners hit US$1.3 trillion, or 34.5% of its total trade. In China, RCEP usage surged 38% in 2024, as businesses tapped the agreement to expand exports and diversify supply chains. On the ACFTA front, Kao spotlighted the upcoming ACFTA 3.0 upgrade, which aims to modernise trade with China by integrating digital economy tools, green initiatives and deeper supply chain links. Negotiations were recently concluded, with a signing slated for the 47th ASEAN Summit in Kuala Lumpur this October. 'ACFTA and RCEP are mutually reinforcing, enabling ASEAN and Chinese firms to broaden their global supply chain footprints,' Kao said. 'Together, they will help build resilient, connected, and future-ready economies.' Related
Barnama
05-06-2025
- Business
- Barnama
RCEP, ACFTA Key To Unlocking ASEAN-China Trade Potential - ASEAN Sec-Gen
BUSINESS From Kisho Kumari Sucedaram HUANGSHAN, June 5 (Bernama) -- Stronger grassroots implementation, simplified processes for businesses, and closer public–private partnerships are key to unlocking the full potential of regional trade pacts, according to ASEAN Secretary-General Dr Kao Kim Hourn. Kao was referring to the Regional Comprehensive Economic Partnership (RCEP) and the ASEAN-China Free Trade Area (ACFTA). He said the frameworks of both are complementary and critical in expanding market access, fostering resilient supply chains and enhancing regional competitiveness. 'Strong public–private partnerships are essential not only to help businesses integrate into regional value chains, but also to support them in scaling up operations and contributing to more responsive policymaking,' he said at the 2025 RCEP Local Governments and Friendship Cities Cooperation (Huangshan) Forum held here today. Kao also noted that micro, small and medium enterprises (MSMEs), the backbone of the ASEAN economy, often face barriers in accessing financing and navigating complex regulations. In this regard, he encouraged local authorities to support MSMEs through targeted outreach, advisory services and simplified administrative processes. He commended the proactive efforts of cities and local governments in facilitating trade adoption through policy dialogues, capacity building and incentive schemes that are essential for helping businesses navigate technical trade rules and realise the benefits of both RCEP and ACFTA.
New Straits Times
05-06-2025
- Business
- New Straits Times
RCEP, ACFTA key to unlocking Asean-China trade potential
HUANGSHAN: Stronger grassroots implementation, simplified processes for businesses, and closer public–private partnerships are key to unlocking the full potential of regional trade pacts, according to Asean secretary-general Dr Kao Kim Hourn. Kao was referring to the Regional Comprehensive Economic Partnership (RCEP) and the Asean-China Free Trade Area (ACFTA). He said the frameworks of both are complementary and critical in expanding market access, fostering resilient supply chains and enhancing regional competitiveness. "Strong public–private partnerships are essential not only to help businesses integrate into regional value chains but also to support them in scaling up operations and contributing to more responsive policymaking," he said at the 2025 RCEP Local Governments and Friendship Cities Cooperation (Huangshan) Forum held here today. Kao also noted that micro, small and medium enterprises (MSMEs), the backbone of the Asean economy, often face barriers in accessing financing and navigating complex regulations. In this regard, he encouraged local authorities to support MSMEs through targeted outreach, advisory services and simplified administrative processes. He commended the proactive efforts of cities and local governments in facilitating trade adoption through policy dialogues, capacity building and incentive schemes that are essential for helping businesses navigate technical trade rules and realise the benefits of both RCEP and ACFTA. RCEP covers 15 countries, including all 10 Asean members and five of its key partners, namely China, Japan, South Korea, Australia and New Zealand. Kao pointed out that RCEP economies contributed US$29.4 trillion, or nearly 28 per cent of global gross domestic product in 2023, while their combined trade was valued at US$13.5 trillion in 2024, accounting for over 28 per cent of global trade. The bloc also represents a consumer base of 2.3 billion people, or nearly one-third of the global population. In China alone, RCEP usage jumped 38 per cent last year, with most firms leveraging RCEP to boost exports and diversify supplier networks. Asean's total trade with RCEP partners totalled US$1.3 trillion in 2024, making up 34.5 per cent of Asean's overall trade. Kao also highlighted the growing importance of the ACFTA, established in 2003, which has already eliminated more than 90 per cent of tariffs between Asean and China. "The ACFTA 3.0 will modernise the agreement and open new doors in the digital economy, green economy, and supply chain connectivity. "It will redefine Asean-China economic relations through innovation and competitiveness," he said. On May 25, Asean Economic Ministers concluded negotiations for the ACFTA 3.0 upgrade alongside the completion of the upgraded Asean Trade in Goods Agreement (ATIGA). Both upgraded agreements are scheduled to be signed on the sidelines of the upcoming 47th Asean Leaders' Summit in Kuala Lumpur in October 2025. Kao further said ACFTA and RCEP form "mutually reinforcing frameworks" that allow Asean and Chinese businesses to expand their global supply chain footprints, with both agreements contributing to long-term economic resilience and integration. "By further harnessing the benefits of RCEP, Asean and China will build resilient and interconnected economies that are capable of withstanding uncertainties and challenges while capitalising on emerging opportunities," he added.
Malaysiakini
02-06-2025
- Business
- Malaysiakini
Asean-GCC-China summit: Forging strategic trilateral future
LETTER | On May 27, Kuala Lumpur became the epicentre of a historic diplomatic convergence as the leaders of Asean, the Gulf Cooperation Council (GCC) and the People's Republic of China gathered for the first-ever Asean-GCC-China Summit. This unprecedented trilateral engagement, held under the chairmanship of Malaysia, marked a milestone in international diplomacy, economic cooperation and strategic alignment among three of the world's most dynamic regions. The summit was more than a mere multilateral meeting. It symbolised the coming together of regions connected by centuries of trade, civilisation, and cooperation from the ancient Silk Road and the maritime powerhouses of Melaka to the energy corridors of the Gulf and the technological advances of modern China. Prime Minister Anwar Ibrahim, as host and chair, reflected this spirit by emphasising the deep historical linkages and shared aspirations that bind these blocs together. Anwar described the summit as a 'new chapter in Asean's journey of outward-looking engagement,' underscoring the trilateral potential of a combined population exceeding 2.15 billion and a gross domestic product (GDP) of US$24.87 trillion. He stressed that such a scale presents immense opportunities to synergise markets, deepen innovation, and foster cross-regional investments. Global dynamics The 2025 summit took place against a backdrop of shifting global dynamics, notably the rise in U.S. protectionism under President Donald Trump's second term. As the United States imposed new rounds of tariffs on Asean exports - reaching up to 49 percent for some member states - there was a clear impetus for regional blocs to assert strategic autonomy. The Asean-GCC-China alignment thus appeared not as a defiance of global order, but as a recalibration of priorities towards multipolarity, cooperation and balanced engagement. While Anwar was careful to reiterate that the US remains an important trade partner, he also reaffirmed Asean's intention to maintain a policy of 'constructive, balanced engagement' with all major powers. This was echoed in the summit's joint statement, which pledged to uphold international law, multilateralism and mutual respect. The summit produced a far-reaching Joint Statement, outlining commitments in six primary domains: economic integration, energy and sustainability, digital transformation, food and agriculture, connectivity and people-to-people exchanges. These areas form the backbone of what the leaders termed a 'unified and collective path toward a peaceful, prosperous, and just future.' The summit reaffirmed the centrality of trade as the cornerstone of trilateral relations. Leaders committed to finalising and signing the Asean-China Free Trade Area (ACFTA) 3.0 Upgrade and looked forward to the early conclusion of the China-GCC Free Trade Agreement. Furthermore, they proposed the establishment of a trilateral regional business council to facilitate dialogue between companies across the three regions, with a special focus on digital trade, fintech, supply chains and empowering micro, small and medium enterprises (MSMEs). There was also a strong push for de-dollarisation strategies, with an emphasis on local currency usage and cross-border payment systems to shield regional trade from external volatility. Infrastructure development was positioned as both an economic and symbolic enabler of regional unity. The Belt and Road Initiative (BRI) was endorsed as a platform to enhance seamless regional connectivity, particularly through digital infrastructure, maritime security cooperation and the development of logistics corridors. These initiatives are expected to diversify economic access and deepen inter-regional trade links between the Asean archipelago, the Gulf and mainland China. On energy Energy featured prominently, reflecting the Gulf's strength as an energy powerhouse and China's and Asean's increasing drive toward clean energy transitions. The summit participants agreed to collaborate on an inclusive, affordable energy transition aligned with the Paris Agreement. Joint efforts will focus on clean hydrogen, low-carbon ammonia, carbon capture and nuclear energy guided by International Atomic Energy Agency (IAEA) standards. The parties also committed to strengthening energy market stability, investing in cross-border energy infrastructure such as LNG terminals and undersea power cables and promoting innovation in emerging green technologies. The leaders acknowledged digital innovation as a strategic priority. There was consensus on exploring cross-regional frameworks for cooperation in digital trade, fintech, artificial intelligence (AI), quantum computing, blockchain and smart city development. To ensure inclusivity in the digital age, the summit endorsed skills development, digital literacy programs, and inclusive platform work protections. Food security was highlighted as an urgent issue, especially amid ongoing conflicts and supply chain disruptions. The leaders agreed to enhance sustainable agricultural practices, promote halal food trade through mutual recognition of standards and diversify food sources to strengthen regional nutrition and food resilience. Cultural diplomacy was also a core theme. The summit committed to boosting educational exchange, scholarship programs, mutual tourism marketing, and cross-cultural initiatives through art, music and literature. A special focus was placed on youth engagement and intercultural dialogue to build mutual trust and long-term friendship among the peoples of the three regions. In addition to development priorities, the summit tackled pressing global humanitarian and security concerns. The plight of Palestinians was addressed comprehensively, with the leaders jointly condemning attacks on civilians in Gaza and calling for a durable ceasefire and full humanitarian access. The summit cited the International Court of Justice Advisory Opinion (July 19, 2024) and UN resolutions supporting the two-state solution based on pre-1967 borders. Qatar's mediation and China's role in facilitating Palestinian unity through the Beijing Declaration (July 2024) were acknowledged and praised. The leaders also endorsed Saudi Arabia's initiative to co-host a High-Level International Conference for Peace in Palestine with France in June 2025. Myanmar crisis In addressing the Myanmar crisis, the summit called for extending the ceasefire initiated after the March earthquake, although concerns were raised about the military regime's sincerity. Nonetheless, Asean reaffirmed its commitment to a peaceful solution through regional consensus and diplomacy. Anwar delivered multiple keynotes during the summit and the accompanying Asean-GCC-China Economic Forum. He celebrated the event as a landmark demonstration of Asean's capacity to convene and lead amidst complexity. Anwar highlighted the rapid economic rise of the GCC, particularly in energy transition and AI development, and reaffirmed China as a vital partner for regional stability, justice, and development. He praised the summit for achieving concrete consensus on governance, economic policy, and human rights advocacy, stating that this summit proves that open dialogue and collective spirit can overcome differences. Chinese Premier Li Qiang echoed similar sentiments, emphasising China's readiness to align development strategies with Asean and GCC partners, and expressing optimism that trilateral synergies would multiply benefits across all regions. GCC leaders, including Kuwait's Crown Prince Sheikh Sabah Khalid Al Sabah, stressed the importance of building resilient partnerships to withstand global crises, while advancing negotiations on a free trade area with Asean. The summit concluded with a collective pledge to implement the joint statement through agreed mechanisms and to build on existing frameworks such as the Asean-GCC and Asean-China platforms. The leaders also looked ahead to future summits, including the Asia Cooperation Dialogue in Doha (October 2025) and the Palestine Peace Conference (June 2025). In short, the Asean-GCC-China Summit represents a bold reimagining of global governance. It demonstrated that in a fragmented international order, regional blocs can lead with purpose, foster inclusivity and champion cooperation over conflict. With Malaysia at the helm, the summit has set a precedent for strategic trilateralism that could shape Asia and the Middle East for decades to come. NURUL AMELLYA AZHAR is a doctorate student in International Political Economy at Universiti Kebangsaan Malaysia. The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.
