China to Expand Influence in SE Asia via FTA

A free trade agreement between China and the Association of Southeast Asian Nations or ASEAN to take effect tomorrow is expected to expand Chinese influence in Southeast Asia.

Beijing will hold a massive event to celebrate the accord Jan. 7 in Nanning, the capital of China’s Guangxi province. Scheduled to attend are government delegations from China and 10 ASEAN member countries as well as CEOs from the world’s top 500 companies.

The agreement will boost economic cooperation between the two regions and lay the groundwork for China to expand its influence in Southeast Asia.

Of the 10 ASEAN member countries, the agreement will take effect first in Thailand, Malaysia, Indonesia, Brunei, the Philippines and Singapore. Cambodia, Laos, Myanmar and Vietnam will implement the deal from 2015.

The agreement will eliminate tariffs on 7,000 products that account for 90 percent of products traded between China and ASEAN. Chinese media reports said bilateral trade has grown 24.2 percent on average every year from 78.2 billion dollars in 2003 to 231.1 billion dollars last year. The agreement is expected to further raise trade between the two regions. The Chinese Commerce Ministry said, “The implementation of the free trade agreement signals real and comprehensive cooperation between the two regions.”

China and ASEAN have a combined population of 1.9 billion and generate six trillion dollars in GDP. Bilateral trade volume is 4.5 trillion dollars a year.

Beijing has sought a foothold in the ASEAN market over the past six years by providing member countries with a venue to promote their products through the China-ASEAN Expo in Nanning.

In December last year, Guangxi and Yunnan provinces agreed with ASEAN to make payments in yuan. Early this year, China also set up a currency swap agreement with Malaysia worth 80 billion yuan and another with Indonesia worth 100 billion yuan to weather the global financial crisis.

Separately, Chinese Vice President Xi Jinping visited Myanmar Dec. 21 to seal a deal on building an oil pipeline 771 kilometers long running from Yunnan through Myanmar to the Indian Ocean. This deal is important from a strategic perspective as well as an economic perspective, according to experts. Establishing a route to transport Mideast oil without crossing the Strait of Malacca, an area which is influenced by the U.S. Navy, is China’s long-cherished wish.

Experts say China’s growing influence in ASEAN, which has long been Japan’s turf even before World War II, will weaken Japan’s clout in the region and lead to fierce competition between Asia’s top two economies.

An example of China’s growing influence in Southeast Asia is Cambodia’s recent repatriation of 20 people from the northwestern Chinese city of Urumqi. They had sought asylum in the Southeast Asian country in the wake of unrest that occurred in the city July 5.

bonhong@donga.com