Final term essay:

SINO-ASEAN RELATIONS
IN THE EARLY TWENTY-FIRST CENTURY

Professor: CHOU, YANG-SUN

Course: SEMINARS ON CHINA'S RELATIONS
Name: Trinh Le Kha – A9106793

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 TABLE OF CONTENT

I. ASEAN’s Role in the Chinese Foreign Policy Framework...........................4

II. The “ASEAN Plus 3” Approach......................................................................5

III. Economic Relations between China and ASEAN.......................................6

IV. RCEP...............................................................................................................8

V. Conclusion........................................................................................................11

REFERENCES......................................................................................................14

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 INTRODUCTION
At the end of the Cold War, major changes took place in Southeast Asia.
The ASEAN states began to focus on economic development and regional
economic integration. The Asian financial crisis was certainly a major setback to
the ASEAN states. It exposed economic structural problems and led to political
instability in some of those states. As a result, ASEAN has been weakened, and
member states such as Indonesia and Malaysia now tend to look inwards because
of domestic political problems. Singapore's pursuit of bilateral free trade
agreements certainly reflects a decline in confidence in ASEAN's ability to push
for regional economic integration.
China should be satisfied with its achievements in its relations with ASEAN
during the previous decade. In August 1990, China restored its diplomatic ties with
Indonesia. This was followed by the establishment of diplomatic relations with
Singapore in October of the same year, and with Brunei in September 1991. Two
months later, China normalized party-to-party relations as well as state-to-state
relations with Vietnam. In July 1991, Chinese Foreign Minister, Qian Qichen,
attended the ASEAN Ministerial Meeting (AMM) as China had initiated a dialogue
with the regional grouping; subsequently, in July 1996, China became a full
dialogue partner of ASEAN. China joined the ASEAN Regional Forum (ARF) in
1994, and in the following year started regular senior official’s meetings with the
ASEAN states at the deputy foreign minister-level. Finally, in December 1997, a
summit meeting was held between the then nine ASEAN members, on the one
hand, and China, Japan, and South Korea, on the other, as well as between the
ASEAN states and China. In the joint statement released after the latter summit, it
was announced that the two sides had established a partnership of good-
neighborliness and mutual trust. Both parties pledged to resolve their differences
and disputes through peaceful means, and not to allow existing differences to
obstruct the development of friendly and cooperative relations between them.
And the latest negotiation, The Regional Comprehensive Economic
Partnership (RCEP) was signed on 15 November 2020, opening a free-trade
agreement between ASEAN and China, Australia, New Zealand, South Korea,
Japan (ASEAN and 5).

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 I. ASEAN’s Role in the Chinese Foreign Policy Framework
In an era of economic reforms and its opening up to the external world,
China wants to secure a peaceful international environment to concentrate on
economic development. Its strategy in the Asia-Pacific region has been consistent:
to stabilize China's periphery, and treat the region as China's base.
Chinese leaders accept that regional co-operation is an irreversible trend in
global economic development and the evolution of the contemporary international
power configuration. As the largest developing country in the Asia-Pacific region,
China has to participate and promote regional economic cooperation
enthusiastically to strengthen its influence in the region. The Chinese authorities
understand that only through active participation, will China be able to benefit
from the regional economic cooperation process, and direct the flows of capital,
technology, and commodities in directions favorable to China’s development. They
certainly hope to influence the orientation and development of the organizations
for regional co-operation, and at the same time enhance China’s position to oppose
hostile blocs and organizations. It has been with such intentions that China has
participated in the Asia-Pacific Economic Co-operation (APEC), Pacific Economic
Co-operation Council (PECC), ASEAN Regional Forum, and so on.
China and the countries of Southeast Asia have been concentrating on
strengthening their economic base. In their pursuit of economic development and
prosperity, economic linkages between them in the areas of trade, investment,
finance, and technology have been strengthening. At the same time, China and
ASEAN share very similar stands on issues such as Asian values. The discourse on
Asian values emerged in the early 1990s, articulated most prominently by the then
Prime Minister of Singapore, Lee Kuan Yew, and Prime Minister Mahathir
Mohamad of Malaysia, they argued that the ethical foundations of Asian societies
rest on values that emphasize consensus and harmony, loyalty to family and
community, hierarchy and deference to authority, as opposed to Western ideals
which stress individual rights, civil liberties, and competitive politics. The
consensus on Asian values between China and ASEAN was best symbolized by
the Bangkok Declaration, which embodied their agreement on the common human
rights position to be articulated at the World Conference on Human Rights, held in
June 1993 in Vienna, emphasized economic growth, community interests, non-

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interference in other countries domestic affairs, and respect for each other’s
different socio-economic, historical, and cultural backgrounds.
China has made every effort to support and solve the difficulties of
Southeast Asian countries to improve the relationship between China and ASEAN
to ensure its ambition to become a great power with the ASEAN's support.
Improvements in Sino-ASEAN relations were perhaps reflected in the following:
in 1993, some mass media in ASEAN capitals called it “the ASEAN year” in
Chinese diplomacy because of the frequent visits of ASEAN leaders to Beijing.
II. The “ASEAN Plus 3” Approach
Because of the difficulties in Sino-American relations, now attach top
priority to East Asian cooperation following the formula of “ASEAN-10 plus
China, Japan, and South Korea”. This was, in fact, the East Asian Economic
Grouping (EAEG) proposal of Prime Minister Mahathir in the early 1990s, based
on his desire to create a new Asian political bloc excluding the “white” nations in
the Asia-Pacific." The EAEG proposal was opposed by the United States, and that
opposition was to deter Japan from supporting it. Without the active participation
of Japan, the idea had to be dropped for the time being.
The summit meeting between the then nine ASEAN members plus
China, Japan, and South Korea in Kuala Lumpur in December 1997 was thus an
important breakthrough in the eyes of Malaysia, Singapore, and China because of
the earlier opposition from the United States. According to China’s Asian experts,
the real driving force was derived from the Asian financial crisis of 1997—98. The
lukewarm support from the United States, the faulty and harsh rescue packages
offered by the International Monetary Fund (IMF), and the inaction on the part of
APEC all made the East Asian leaders appreciate the significance of regional
cooperation. Furthermore, the domestic difficulties in the ASEAN states in the
wake of the financial crisis prompted their leaders to turn to Northeast Asia; at the
same time, the Northeast Asian countries were seeking ways to exploit the
evolution of the ASEAN Free Trade Area (AFTA). By then, about half of the East
Asian countries’ foreign trade was intraregional, and roughly two-thirds of their
foreign investment also came from within the region.
In the third “ASEAN plus 3” summit in November 1999, a joint
statement on East Asian co-operation was released. Based on the previous

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agreements reached, the fourth summit held in Singapore in 2000 was considered a
significant step in regional cooperation. It confirmed the earlier Chiang Mai
agreement on regional monetary cooperation, the human resources action plan, and
the Greater Mekong River development project; and it also agreed to consider an
East Asian free trade and investment area. Subsequently, an East Asian Vision
Group was established with the responsibility of reporting to further summits on
long-term regional cooperation. It would study: An East Asian free trade and
investment area; a regional monetary fund and exchange regime; regional
institutional building on economic and financial co-operation, as well as political,
security, social, and cultural exchanges and co-operation to strengthen regional
identity. Chinese leaders seemed to adopt the stance that political and security co-
operation is one of the important areas for further development. According to
Zhang Yunling, besides annual summits and ministerial meetings, the Chinese
authorities have the following ambitious objectives for “ASEAN plus 3”: a
concerted voice in international affairs; a regional parliamentary committee;
defense ministers’ meeting and East Asian security co-operation council; and joint
action on cross- border issues.”
Chinese leaders' worry about the deterioration in Sino-American
relations, and the potential danger of the “containment” of China by Western
countries has been an important motivation for their promotion of East Asian
regionalism through the “ASEAN plus 3” route. On the part of the ASEAN states,
they hope that this regionalism may enable them to deal with Western countries
from a position of strength on issues such as protectionism, in contrast to their
impotence during the Asian financial crisis. The ASEAN states are disappointed
with APEC’s failure to serve as an engine to push the World Trade Organization
(WTO) to launch a new round of global trade negotiations; they have also become
more cautious abo ut globalization." The potential of East Asian regionalism has
caught the attention of observers such as C. Fred Bergsten, who has felt that the
“ASEAN plus 3” process would, in the medium term, bring about “the most
important changes to the world’s financial structure”. Bergsten has stated: “For the
first time in history, the world is becoming a three-block configuration. Not only
global economic relationships, but political ones too, will turn on the direction the
new agreements will take - and how the United States and others outside the region
decide to respond to them.

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 III. Economic Relations between China and ASEAN
Trade between China and the ASEAN states had been expanding at a
respectable rate in the decade before the Asian financial crisis. In the wake of the
economic setback, trade stagnated when both parties turned to increase their
exports to the United States and Western Europe. In May 2001, when the global
economic slowdown threatened to stall regional economic recovery, ASEAN labor
ministers appealed to senior officials from China, Japan, and South Korea, in their
first joint annual meeting, for funding and technical assistance for programs aimed
at easing regional unemployment stemming from the global downturn. The
ASEAN ministers especially urged China to continue to open its market to help
enhance the slackening demand for ASEAN exports. With Beijing’s successful bid
for the 2008 Olympic Games, healthy economic growth (7.9 percent in the first
half of 2001), and its entry into the WTO, the ASEAN states have considerable
expectations of China contributing to their economic well-being.
In principle, the ASEAN states welcomed the proposal from Chinese
Premier Zhu Rongji on the establishment of a free trade area between China and
ASEAN. Both parties appreciate, however, that this is only a long-term objective.
They see considerable complementarity between their economies and significant
potential in economic cooperation and trade development. China’s Southeast-
Asian experts have indicated that Sino-ASEAN trade amounts to only 6 percent of
China’s total trade and that the achievement of free trade between the two sides
would require arduous negotiations. Certain sensitive product categories would
also be controversial.’ The existing high and uneven levels of local protectionist
tactics ranging from roadblocks to punitive tariffs, petty corruption at the
bureaucratic level, and the unsatisfactory state of corporate governance on both
sides remain significant problems in Sino-ASEAN economic cooperation.
China has also been attracting foreign investment from the ASEAN states,
especially from ethnic Chinese communities. In 1999 alone, US$3.289 billion was
invested in China by the Southeast Asian business community, although 80 percent
of this came from Singapore. Among China’s coastal provinces, there will be
increasingly keen competition for investment from the ASEAN states. Guangdong
Party Secretary, Li Changchun, made a strong pitch for Singapore’s business
community to increase its trade and investment links with southern China during

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his visit to the island state in May 2001." Apart from the competition from China,
the main reason for the serious decline in foreign investment flows into ASEAN
has been foreign investors’ perception of increased political risk and economic
instability in many of the countries in the region. The absence of clear direction
and coherence in political decision-making in some ASEAN states has also turned
foreign investors away. Such problems have prompted ASEAN leaders to cross a
previously forbidden line, to discuss each other’s domestic problems at the
informal ASEAN summit in Singapore in November 2000. “Singapore, in
particular, has been highlighting the strong competition from China in persuading
its ASEAN partners to promote trade and investment liberalization within the
regional grouping.
An important area of achievement in East Asian regionalism was the Chiang
Mai Initiative, agreed to in May 2000 during the “ASEAN plus 3” finance
ministers meeting. It involves an expanded ASEAN swap arrangement which
would include all the ASEAN countries, and a network of bilateral swap
arrangements among the ASEAN states, China, Japan, and South Korea. The
arrangement is aimed at offering support to member countries encountering short-
term foreign exchange difficulties. It is intended to discourage a repeat of the 1997
crisis, by linking the foreign exchange reserves of the thirteen countries, which
amount to almost US$1 trillion. This currency safety net led the creation of an
Asian Monetary Fund."
IV. RCEP
The Regional Comprehensive Economic Partnership (RCEP) is a free trade
agreement between the Asia-Pacific nations of Australia, Brunei, Cambodia,
China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines,
Singapore, South Korea, Thailand, and Vietnam. The 15 member countries account
for about 30% of the world's population (2.2 billion people) and 30% of global
GDP ($26.2 trillion) as of 2020, making it the biggest trade bloc in history.
Unifying the preexisting bilateral agreements between the 10-member ASEAN and
five of its major trade partners, the RCEP was signed on 15 November 2020 at a
virtual ASEAN Summit hosted by Vietnam, and will take effect 60 days after it has
been ratified by at least six ASEAN and three non-ASEAN signatories.

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 The trade pact, which includes a mix of high-income, middle-income, and
low-income countries, was conceived at the 2011 ASEAN Summit in Bali,
Indonesia, while its negotiations were formally launched during the 2012 ASEAN
Summit in Cambodia. It is expected to eliminate about 90% of the tariffs on
imports between its signatories within 20 years of coming into force, and establish
common rules for e-commerce, trade, and intellectual property. The unified rules
of origin will help facilitate international supply chains and reduce export costs
throughout the bloc.
The RCEP is the first free trade agreement between China, Japan, and South
Korea, three of the four largest economies in Asia. Several analysts predicted that
it would offer significant economic gains for signatory nations, as well as "pull the
economic centre of gravity back towards Asia, with China poised to take the lead
in writing trade rules for the region", leaving the U.S. behind in economic and
political affairs. Reactions from others were neutral or negative, with some
analysts saying that the economic gains from the trade deal would be modest. The
RCEP has been criticized for ignoring labor, human rights, and environmental
sustainability issues.
The agreement is intended to reduce tariffs and red tape. It includes unified
rules of origin throughout the bloc, which may facilitate international supply
chains and trade within the region. It also prohibits certain tariffs. It does not focus
on labor unions, environmental protection, or government subsidies.
The RCEP is not as comprehensive as the Comprehensive and Progressive
Agreement for Trans-Pacific Partnership, another free trade agreement in the
region that includes some of the same countries. The RCEP "does not establish
unified standards on labour and the environment, or commit countries to open
services and other vulnerable areas of their economies."
Members of the RCEP make up nearly a third of the world's population and
account for almost 30% of global gross domestic product. The new free trade bloc
will be bigger than both the United States–Mexico–Canada Agreement and the
European Union. The combined GDP of potential RCEP members surpassed the
combined GDP of Trans-Pacific Partnership (TPP) members in 2007. It was
suggested that continued economic growth, particularly in China and Indonesia,
could see total GDP in the original RCEP membership grow to over US$100
trillion by 2050, roughly double the project size of TPP economies. On 23 January
2017, President Donald Trump signed a memorandum withdrawing the United
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States from the TPP, a move which was seen to improve the chances of success for
RCEP.
According to a 2020 projection, the agreement is expected to enlarge the
global economy by US$186 billion. According to Peter Petri and Michael Plummer
of the Brookings Institution, the RCEP could add $209 billion annually to world
incomes, and $500 billion to world trade by 2030, and that "new agreements will
make the economies of North and Southeast Asia more efficient, linking their
strengths in technology, manufacturing, agriculture, and natural resources".
According to computer simulations in a related paper also by Petri and Plummer
published by the Peterson Institute for International Economics (PIIE), the RCEP
will raise global national incomes in 2030 by an annual $147 billion and $186
billion respectively, "yield especially large benefits for China, Japan, and South
Korea and losses for the United States and India, and "will be especially valuable
because it strengthens East Asian interdependence, raising trade among members
by $428 billion and reducing trade among nonmembers by $48 billion".
The simulations in Petri and Plummer's PIIE paper showed that the RCEP
and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership
(CPTPP) would together more than offset the global negative economic impact of
the China-United States trade war, but not the individual losses of China and the
United States. Moreover, the incremental value of the CPTPP will be reduced by
the trade war (from $147 billion to $121 billion) while the value of RCEP will be
increased (from $186 billion to $209 billion). The PIIE working paper also stated
that "RCEP will be economically significant with or without India, and indeed
more significant than the CPTPP, with especially important benefits for China,
Japan, and Korea" and that "RCEP will reorient trade and economic ties away from
global linkages toward regionally focused relationships in East Asia."
According to the Asian Development Bank (ADB), the RCEP is "relatively
comprehensive in coverage" and combines existing deals, which brings Asia a step
closer to a region-wide trading bloc. The agreement further liberalizes goods and
services trade, establishes common rules of origin for all goods traded, establishes
commitments regarding government procurement, and aims to establish open and
competitive markets. Though the degree of liberalization within RCEP is not as
deep as in the CPTPP, RCEP members are projected to gain $174 billion in real
income by 2030, equivalent to 0.4% of the members' aggregate GDP. China, Korea
and Japan will benefit the most, with likely gains of $85 billion for China, $48
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billion for Japan, and $23 billion for Korea. Other significant RCEP gains will
accrue to Indonesia, Malaysia, Thailand, and Vietnam. Due to their RCEP
membership, Japan and Korea would accrue gains amounting to 1% of their GDP
while Malaysia, Thailand, Vietnam and Brunei would all accrue gains of 0.5% of
GDP or higher.
V. Conclusion

China’s uninterrupted economic growth in the wake of the Asian financial

crisis and its entry into the WTO has enhanced its attraction as a market for the
ASEAN states. Because of Japan’s economic stagnation, China has now
considered a more important locomotive in generating regional economic growth.
There is a genuine concern that investment flows into China may reduce those into
the ASEAN states. However, the international financial community tends to see it
differently. Many investment bankers believe that FDI flows to China and the rest
of Asia have been complementary and not competitive. In the first half of the
1990s, when there was a significant upsurge in FDI going into China, FDI flows to
the rest of Asia also increased. Similarly, in recent years, during the slowdown of
investment flows into the large resource-based Southeast Asian economies, FDI
flows into China also dipped." According to Cliff Tan, since Asian countries are at
different development stages, FDI may be attracted by the comparative advantages
within the region: some to abundant labor, some to technological know-how, and
so on. Moreover, capital movement is motivated by the multinationals' desire to be
close to their ultimate customers and other partners in the production processes.
Hence, there are considerable incentives to diversify investment if the market in
Asia is dispersed."
The extent to which China provides demand for ASEAN’s exports is
increasingly important. Asia, excluding Japan, enjoyed a market share of more
than 36 percent of China’s imports in 2000, compared with 10 percent for the
United States and 14 percent for Europe. Taiwan secured a market share of 11
percent, South Korea 10 percent Hong Kong 4 percent, and the ASEAN states
collectively more than 9 percent.’
It seems that ASEAN will benefit disproportionately from China's entry into
the WTO. It has also been observed that servicing China’s expanding middle class
is likely to become an increasingly important source of revenue for the ASEAN
states, especially Thailand and Singapore. Chinese tourists in the ASEAN states
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have already been mentioned; Asian companies which can capitalize on exporting
agricultural goods to China’s more discerning middle classes will also do well.
Such development trends are predicated on the maintenance of healthy economic
growth in China. There is a more pessimistic view, however, that competition from
China may hurt countries like Thailand, Indonesia, and the Philippines, because
their economies are at a similar stage of development as that of China. Owing to
the diversity in China, it may be simultaneously developing its agricultural,
industrial, and technological sectors, and hence there may not be much room
to absorb more agricultural imports from the ASEAN states. Free trade, however,
should definitely offer a more optimistic outlook.
Economic contacts could enhance mutual understanding between China and
ASEAN, especially at the people-to-people level. The strengthening of common
economic interests will provide a better foundation for confidence-building
measures, preventive diplomacy, and eventually conflict resolution. China realizes
that it has to be more active in multilateral diplomacy, especially at the regional
level, and some efforts, though still far from adequate, have been made. For
example, a forum conceived in September 1998 by regional statesmen, including
former Australian Prime Minister Bob Hawke and former Philippine President
Fidel Ramos, received strong support from the Chinese Government. The Boao
Forum for Asia, to be held in Hainan province in China in February 2002, is
intended to allow regional states to discuss their problems on their own terms."
The Chinese Government’s enthusiastic support for a non-governmental,
non-political, and private-sector-driven organization is indeed a sign of the times.
Chinese leaders are aware of their acute shortcomings and, it would seem, are now
ready to play a more active part in Track-2 processes. All these constitute positive
factors facilitating the gradual erosion of the ASEAN states’ distrust for China and
their fear of the “China threat”.
About RCEP, When the RCEP was signed, Chinese premier Li
Keqiang declared it "a victory of multilateralism and free trade". Singaporean
prime minister Lee Hsien Loong called it "a major step forward for our region" and
a sign of support for free trade and economic interdependence. Several analysts
predicted that it would help stimulate the economies of signatory nations amid
the COVID-19 pandemic, as well as "pull the economic centre of gravity back
towards Asia, with China poised to take the lead in writing trade rules for the
region", leaving the U.S. behind in economic and political affairs.
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 Mohamed Azmin Ali, Minister of International Trade and Industry of
Malaysia, said the RCEP would encourage local businesses to enter global markets
and would increase Malaysia's exports. He stated that RCEP signatories would
enjoy preferential treatment due to the removal of tariff and non-tariff trade
barriers.
Joko Widodo, President of Indonesia, stated that the signing of the RCEP
was a historic day that signaled Indonesia's strong commitment to
multilateralism. Agus Suparmanto, Indonesian Minister of Trade, said that the
RCEP could boost Indonesia's exports to signatory nations by 8-11% and boost
investment into Indonesia by 18-22%, and expressed confidence that the trade pact
would benefit Indonesian business.
Moon Jae-in, the President of South Korea, praised the RCEP as an
unprecedented mega regional trading agreement and expressed confidence that it
will "contribute to the recovery of multilateralism and the development of free
trade around the world, beyond the region". Moon also stated that he expects the
RCEP to open the world's biggest e-commerce market. The Korean Chamber of
Commerce and Industry welcomed the conclusion of the RCEP, expecting that it
would "expand a new free trade bloc and serve as the basis for revitalizing the
Asia-Pacific regional economic markets". The RCEP will benefit Korean
companies by removing tariffs on several Korean imports in signatory nations,
especially in steel, automobiles and electronics.
Kishore Mahbubani, Singapore's former permanent representative to
the United Nations and former President of the United Nations Security Council,
stated that the "future of Asia will be written in four letters, RCEP" and that India
did a major geopolitical favor to China by withdrawing from the RCEP, just as the
United States did by withdrawing from the CPTPP. Mahbubani added that with
India and the United States absent, "a massive economic ecosystem centered on
China is evolving in the region".
According to Peter Petri and Michael Plummer at the Brookings Institution,
the agreement represented "a triumph of ASEAN's middle-power diplomacy" and
would lead to significant increases in world incomes and trade by 2030, even
though it "says nothing at all about labor, the environment, or state-owned
enterprises". They added, "However, ASEAN-centered trade agreements tend to
improve over time."

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REFERENCES

https://en.wikipedia.org/wiki/Regional_Comprehensive_Economic_Partnership#Hi
story

https://asean.org/storage/2020/11/Summary-of-the-RCEP-Agreement.pdf

Sino-ASEAN Relations in the Early Twenty-first Century JOSEPH Y. S. CHENG

https://en.wikipedia.org/wiki/ASEAN%E2%80%93China_Free_Trade_Area

https://asean.org/asean/external-relations/china/

https://www.csis.org/analysis/last-rcep-deal

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