Since the beginning of this year, the volume of imports and exports between China and the Association of Southeast Asian Nations (ASEAN) has bucked the trend. Asean has surpassed the European Union to become China's largest trading partner. According to the latest data released by the General Administration of Customs, in the first five months of this year, the total trade value between China and ASEAN reached 1.7 trillion yuan, up 4.2 percent, accounting for 14.7 percent of China's total foreign trade. Among them, China's export to ASEAN reached 936.62 billion yuan, up by 2.8%, and its import from ASEAN reached 7.59.86 billion yuan, up by 6% year-on-year, both higher than the overall growth rate of China's foreign trade in the same period.
Gao Feng, spokesman for the Ministry of Commerce, said at a regular briefing that ASEAN's emergence as China's largest trading partner fully reflects the "potential and resilience" of bilateral trade.
In the opinion of Xu Liping, a researcher at the Institute of Asia-pacific and Global Strategy of the Chinese Academy of Social Sciences, it is "inevitable for historical development" that China-Asean trade rises against the trend.
Bucking the trend upward is inevitable also have accidental factor
In the first five months of this year, China's total trade with the European Union, the United States and Japan fell due to coVID-19. In this case, the trade between China and ASEAN bucked the trend is very rare.
"The growth of China-Asean bilateral trade is an inevitable development in history. The bilateral trade between China and ASEAN is in a growing trend and highly complementary. Last year, the Protocol on upgrading the China-Asean Free Trade Area came into force, adding new impetus to bilateral trade liberalization and facilitation. Moreover, china-asean bilateral trade stock is huge, and this trade growth is also a kind of growth inertia." Mr Xu said.
China and ASEAN have signed a number of agreements in the economic and trade field, which has provided institutional dividends for the continuous growth of bilateral trade. The China-Asean FREE Trade Area is the first and largest free trade area negotiated by China with other countries. In 2002, the two sides signed the Comprehensive Economic Cooperation Framework Agreement to start the construction of the FREE Trade Area. Later, agreements on goods, services and investment were signed successively. By 2010, the China-Asean Free Trade Area had been fully completed. In October 2019, as an outcome document of the negotiations on upgrading the China-Asean FREE Trade Area, the Protocol on Upgrading the China-Asean Free Trade Area took full effect. Within the framework of the China-Asean Free Trade Area, over 90 percent of goods from China and ASEAN have achieved zero tariffs.
According to the information released by the International Department of the Ministry of Commerce, when the China-Asean FREE Trade Area was just launched in 2002, the bilateral trade volume was 54.8 billion US dollars. By 2018, bilateral trade had reached us $587.8 billion, a nearly 11-fold increase in 16 years.
However, in the first half of this year, ASEAN overtook the European Union to become China's largest trading partner.
"Since the outbreak of COVID-19 in the EU and the US this year, the EU and the US have taken lockdown measures to combat the epidemic. International logistics are not smooth, which has a significant impact on international trade. At the same time, geographical proximity, lower transportation costs and less logistics restrictions between China and ASEAN are favorable conditions for promoting intra-regional trade, "he said. Said Yuanliu Hu, an Asia-Pacific economist at the Institute of International Finance.
From January to May this year, the trade volume between China and the EU fell by 4.4% to 1.6 trillion yuan, accounting for 13.9% of China's overall trade volume. China's exports to the EU were 968.8 billion yuan, while imports were 637.3 billion yuan. In the first five months of this year, the total value of China-Us trade was 1.29 trillion yuan, down 9.8 percent year-on-year and accounting for 11.1 percent of the total.
"Without the outbreak, it would be difficult for the bilateral trade between China and ASEAN to break through the trade scale between China and Europe, because there is still a considerable gap between the market size of ASEAN and the EU." Xu Liping said.
The industrial chain between China and ASEAN regions is getting closer
Nathan Chow, strategist at DBS, comments that, apart from the us and Europe, bilateral trade between China and ASEAN is also partly due to trade frictions with the US. Because of trade frictions between China and the United States, some upstream manufacturing companies have shifted production to other parts of Asia, such as the Association of Southeast Asian Nations (ASEAN), to avoid tariffs imposed by the United States.
"These shifts in manufacturing have actually led to more relabelling and assembly activities between China and ASEAN." Yuanliu Hu said.
Asean has long been China's third largest trading partner. Last year, the rank of China's major trading partners changed, and ASEAN became China's second largest trading partner. To be specific, China's imports and exports to the EU, its largest trading partner, reached 4.86 trillion yuan in 2019, an increase of 8%. Imports and exports to ASEAN reached 4.43 trillion yuan, up 14.1%; Imports and exports to the United States totaled 3.73 trillion yuan, down 10.7 percent.
"The trade frictions between China and the US, combined with the impact of this year's COVID-19 outbreak, have led to a downward trend in trade between China and the US and Between China and Europe, while trade between China and ASEAN continues to grow." "Said Bai Ming, deputy director of the International Market Research Institute of the Chinese Academy of Commerce.
It is worth noting that trade between China and ASEAN in technical products, especially machinery and electronic products, has grown remarkably this year. So far this year, China has imported $51.8bn of these products from the six ASEAN countries -- Singapore, the Philippines, Vietnam, Thailand, Indonesia and Malaysia -- up 27.7 per cent year on year, according to DBS.
In the first quarter of 2020, China imported $14.9 billion worth of integrated circuits from ASEAN countries, an increase of 25 percent over the previous year, according to the official website of the China-Asean Business Council. Mainly includes chip capacitor, microprocessor chip and AD converter; China, meanwhile, has exported about $6bn worth of integrated circuits to ASEAN, up 28 per cent year on year.
"Much of the growth in China's IMPORTS of INTEGRATED circuits from ASEAN is coming from Vietnam, where exports of phones and related components to China jumped 300 per cent year-on-year in the first four months of this year, while exports of computers and related components rose 40.8 per cent year-on-year. This is also a manifestation of the increasingly close industrial chain between regions." Yuanliu Hu said.
Bilateral trade between China and Vietnam is growing fastest among ASEAN countries, according to DBS. So far this year, China's imports from Vietnam are up 25.5 percent year on year, while imports from Indonesia are up 5.7 percent.
Together management consulting firm analysis pointed out that under the sino-us trade friction, low by local labor costs and improve infrastructure and legal environment, Japan, South Korea, some of the manufacturing industry chain transfer to the association of south-east Asian nations (asean), set up integrated circuit manufacturers in places such as Vietnam, Malaysia, to meet the needs of the Chinese market. However, this does not mean that the industrial chain moves to ASEAN as a whole. It is more an extension of China's industrial chain. Many manufacturing bases still need to import raw materials, equipment, instruments and technologies from China.
RCEP will further provide institutional dividends
Looking ahead, will china-asean trade maintain this good momentum?
"The EU is expected to return to its position as China's largest trading partner as the global epidemic is brought under control and the US and Europe begin to restart their economies one after another. But in the longer term, trade between China and ASEAN is expected to continue to surpass the total trade between China and the US, given the trade frictions between the two countries." "Says Yuanliu Hu.
According to Nathan Chow, a strategist at DBS, the combination of complementary industrial structures between China and ASEAN and low regional logistics costs is expected to further strengthen bilateral trade ties. In addition, the Regional Comprehensive Economic Partnership (RCEP) will further boost bilateral trade.
The RCEP negotiation was initiated by 10 ASEAN countries in 2012 and six countries, Namely Australia, China, India, Japan, South Korea and New Zealand, were invited to participate. It covers half of the world's population, accounts for about 32.2% of the world's GDP and 29.1% of the world's trade volume. In terms of trade in goods, the RCEP is more than 90% open, higher than that of the WTO.
At the third RCEP leaders' meeting held in early November last year, the 15 countries except India concluded negotiations on all 20 chapters of the text and virtually all market access negotiations. In the statement, the leaders instructed the negotiating team to immediately start reviewing the text with the goal of signing the agreement by 2020. India has said it will not participate in the RCEP for the time being due to concerns about trade deficit growth and other issues.
According to 2018 data, the total population of the 15 countries excluding India has reached 2.2 billion, the GDP has reached 29 trillion US dollars, the export volume has reached 5.6 trillion US dollars, and the foreign investment flow has attracted 370 billion US dollars. These indicators basically account for about 30% of the global total.
"It was basically agreed last year that 15 member states would sign up and India would join when the conditions were right. More than 80 per cent of the text has been finalised and is expected to be formally agreed by the end of the year, thanks to the efforts of China and others." Xu Liping said.
On June 4, the special meeting of ASEAN and China, Japan and The Rok (10+3) to combat COVID-19 was held by video. The joint statement released at the meeting indicated that asean +3 countries will strive to conclude RCEP within this year to strengthen trade and investment facilitation cooperation and promote cross-border trade and investment development.
In bai Ming's view, accelerating infrastructure connectivity with asean through the "One Belt And One Road" initiative will further promote unimpeded trade. "we need to accelerate the construction of infrastructure between China and asean, which will effectively reduce logistics costs and provide favorable conditions for trade development."
In addition to trade in goods, Xu liping believes that there is a huge space for growth of trade in services between China and ASEAN.
"Bilateral trade in goods has achieved extensive tariff-free coverage. If the trade relationship is to continue to grow and cooperation in services can be further deepened, more obstacles need to be removed in services trade." Xu Liping said.
