By Nisit Panthamit, Yasuhide Osawa, Paisarn Panthamitr
ASEAN countries and China are good neighbors connected by mountains and waters and close partners engaged in extensive cooperation for mutual benefits. Their friendship dates to ancient times. By embracing more development opportunities of the day, the ASEAN-China relationship can enjoy an even brighter future.
Since the establishment of dialogue relations in 1991, ASEAN-China political trust has been deepened, people-to-people exchange intensified and practical cooperation has resulted in fruitful results. In 1996, the ASEANChina Full Dialogue Partnership was established. In 1997, both sides agreed on the ASEAN-China 21st Century-Oriented Partnership of Good Neighborliness and Mutual Trust. In 2003, bilateral relations were upgraded to a strategic partnership. The year 2018 marked the 15th anniversary of the ASEAN-China Strategic Partnership. Momentum in bilateral cooperation has been growing.
For China’s Belt and Road Initiative (BRI), ASEAN-China economic cooperation and trade relations have become very important.
From a geographical angle, ASEAN is the key hub of the 21st Century Maritime Silk Road. From the perspective of economic ties, ASEAN is a part of China’s comprehensive economic and trade policy and investment in construction of the 21st Century Maritime Silk Road. From the perspective of strategic national investment, establishment of the Asian Infrastructure Investment Bank and Silk Road Fund has clearly aimed investment sights on ASEAN countries.
In his book The Governance of China (II), Chinese President Xi Jinping declares that “China will endeavor to build a mutually beneficial business partnership with countries participating in the Belt and Road Initiative, enhance trade and investment with them, and build a Belt and Road free trade network.” The initiative has become an important opportunity to elevate bilateral relations to a new level.
Expansion of Economic Cooperation
With a total area of 4,435,600 square kilometers and population of 625 million, ASEAN is the third largest country group in the world, the seventh largest economy and fourth largest import and export trade zone. It is a key developing area in absorbing foreign direct investment (FDI). Its abundant natural resource endowments, market potential and geographical proximity to multiple regions make it attractive globally, and the development needs of China’s “going global” campaign have accelerated the pace of Chinese companies’ investment in ASEAN.
ASEAN has been the biggest destination for Chinese investment among countries along the Belt and Road. China’s investment in ASEAN is both theoretically and practically significant. Statistical data paints a clear picture.
ASEAN’s trade with China expanded rapidly in 2000. Earlier, ASEAN mostly exported to the United States and Japan. By 2015, ASEAN was conducting major trade, both exporting and importing, with East Asia including China. In 1980, the biggest trade partner of ASEAN was Japan (25.9 percent, other ASEAN countries 15.9 percent, China 1.6 percent). In 2016, the major trade partner of ASEAN was other ASEAN countries (23.3 percent) followed by China at 16.4 percent and Japan at 9.0 percent. Volume of trade with Japan did not decrease, but volume of trade with China suddenly jumped.
China has been ASEAN’s largest trade partner since 2009. ASEAN-China trade volume reached US$587.8 billion in 2018, a year-on-year increase of 14.1 percent. In the first half of 2019, according to statistics from China, ASEAN overtook the US as China’s second-largest trading partner.
Chinese investment in the ASEAN economy is influential. The volumes of Chinese outward direct investment flow started from US$2.7 million in 2002 and rose to US$196.2 million by 2016. Analysis of the regional composition of Chinese outbound FDI in 2016 showed Asia with the biggest portion at 66 percent.
ASEAN and China are each other’s major source of tourists and key travel destination. Bilateral visits between ASEAN and China have approached 32 million. In summer and autumn, more than 2,700 flights shuttle between ASEAN countries and China each week. By the end of 2016, mutual student mobility exceeded 200,000. As ASEAN’s consumption increases, the number of its tourists and students visiting China is expected to rise as well.
Deepening Cooperation through Innovation
Development of the ASEAN economy is fueled by trade and investment from China. Investment from China is improving the technological capacity of the ASEAN economy.
ASEAN has placed greater emphasis on innovation. The ASEAN Summit in 2017 issued the ASEAN Declaration onInnovation which stated that ASEAN would enact holistic policies to foster innovation, encourage and support innovation-oriented enterprises, support micro, small, and medium-sized enterprises and strengthen research and innovation.
Both ASEAN and China have made innovation-driven development a priority. Seeking innovative, coordinated, green, open and shared development, China is pursuing a strategy of innovation-driven development and striving to become a country of innovators. To this end, China is promoting a national big data strategy and the Made in China 2025 Plan. China aims to advance its manufacturing industry based on the 2025 Plan. By that year, the plan aims to see China “become a world manufacturing power.”
Under the 2025 Plan, China sets 10 important fields and 23 items including the next-generation information technology and new energy car. China sets a domestic proportional aim for every item. For example, in the item of mobile communication system facilities which held the key to next-generation communication standard “5G”, it advocated the high aim of 80 percent in the Chinese market by 2025. To achieve the aim, the government proposes measures such as financial support for the allied industry or the improvement support of the generic technology in succession.
Improving the Transportation Network
China has been promoting the BRI to achieve greater regional connectivity both physically and economically. The BRI is a global development initiative involving infrastructure development and investment in Asia, Europe, Africa and the Middle East. The program promotes infrastructure investment in sectors including roads, ports, energy, pipelines and communication for decades into the future.
Insufficient infrastructure investment has bottlenecked the economic development of many developing countries. Financial integration is an important pillar of promotion of the BRI. By exploring new investment and financing models, international multilateral financial institutions and commercial banks have played an important role in expanding channels of diversified financing and providing stable, transparent and quality financial support. By the end of March 2019, the Chinese government had signed 173 cooperation agreements with 125 countries and 29 international organizations.
The Lancang-Mekong Cooperation (LMC) mechanism has also been promoted. The Lancang-Mekong area has some of the greatest development potential in Asia. LMC aims to bolster the economic and social development of sub-regional countries, enhance the wellbeing of their people, narrow the development gap among regional countries and support ASEAN Community building while promoting implementation of the UN 2030 Agenda for Sustainable Development. These various efforts to improve regional connectivity have contributed greatly to the reinforcement of the base of the ASEAN economy.
ASEAN and China will continue to maintain a good relationship across various fields. Good relations stimulate and contribute to each other’s growth. However, results often take time, so long-term planning is necessary. Change occurs only through accumulation. It is important to connect the younger generations to continue work for the next 20 or 50 years.