Is it possible a positive relationship between ASEAN and China?

Today the main concern of ASEAN is how to deal with a rising China. The relation between ASEAN and China began at the beginning of 1990, when China expressed its interest for closer cooperation with ASEAN. However, there are widespread fears that China’s growth is taking place at the expense of the Southeast Asia. It would not be possible a fruitful process of integration between China and ASEAN.

In 2002, Chinese and ASEAN leaders, officially, signed the Framework Agreement on Comprehensive Economic Cooperation and decided the ASEAN-China FTA would be set up in 10 years. It would be first implemented for ASEA-six members and then Vietnam, Laos, Myanmar and Cambodia. However, the fears persist, because the agreement was seen as secures China’s access to the region’s raw materials, and at the same time removes barriers to Chinese exports.

The main reason of ASEAN’s fears rely on the low wages of China, which have encouraged local and foreign enterprises in ASEAN to move to China. For them, China would have advantage in all economic sectors. In the manufactures sector China has low wages assured by its rural migration workers process, including the high tech sector. Even, in the service sector, China count with a increasing number of professional such as engineers, nurses, domestic workers, etc., also with lower wages than its ASEAN counterparts.

ASEAN producers in electronics, furniture, motorcycles, even fruits and vegetables see China as a threat. After the first effects of the FTA, Thai farmers said they cannot sell their products anymore, because the low-priced Chinese vegetable invade the markets. Malaysian and Indonesian workers also complaining about losing jobs, due to closures enterprises. While in Vietnam and Cambodia Chinese textile exports replaced locals production.

Only the trade of raw material such as oil and minerals, which are posed by ASEAN countries, is seen how a complementary relationship between ASEAN and China, but also emerge more critics about the fact that this situation reproduce the old scheme of colonialism, in which ASEAN countries would supply primary product and would buy manufactured product from China.

To the previous, it is added that at 1994 China’s devaluation had the effect to deviate investment from ASEAN to China. Another, fact is that traditionally, Japan have been the most dynamic investor in Southeast Asia, while Japanese official surveys reveled that, now, more than 50% of its manufacturers transnational corporations prefer China than ASEAN countries.

Also, it is known that China had applied some policies to attract investment from ASEAN to the Western of China, because its interest to develop this zone. This is exacerbated by the evidence of protectionism by Western developed countries, which would make China to see the ASEAN market as a possibility to absorb its exportations.

Contrary to the earlier negative consideration, an counterbalance could give evidence that the positive aspects possibly will be greater. Firstly, ASEAN has also an enormous population greater than 500 million of people, and also has a big market of US$ 1 843 billions (similar to the 8 biggest economy of the world).

Additionally, there had been many initiative of industrialization, as well as efforts for assertive cooperation in terms of increasing freer trade among members and potential high tariff for third markets, accompanied with the famous export-oriented strategy.

Table 1: ASEAN members, date of membership, GDP, population and GDP per capita

Source: IMF and CIA. Owned elaboration.

However, any failure of ASEAN should not be attributed to third economies, instead they belong to the same countries members, who should improve their strategies taking the advantage of the international context such as the rising of China. Actually, some ASEAN leaders are increasing recognizing the benefit of a growing Chinese demand. It is valid the strong argument that economic growth and integration is not a zero sum game, it means that if China is rising, then Southeast Asia countries will attract more Chinese trade and investment, then could also get benefits.

ASEAN should design its strategies such as thee interesting measures to ensure inflows of foreign direct investment started at the middle of 1990s, when the members of ASEAN created growth triangles, for example the Indonesia-Malaysia-Singapore Growth Triangle (IMS GT), and the Indonesia-Malaysia-Thailand (IMT) GT, allowing areas trying the best combination of resources for distributed manufacturing and formed attractive investment locations for both domestic and foreign capital.

Another example of strategies is the alliance between China and Singapore, who have worked together on an “eco-city” project since 2007, having the idea of ecological sustainability. Also, due to the recession in advance economies, some ASEAN countries ask for investment from China, for instance leaders of Cambodia, Laos and the Philippines.

More facts are the famous China-ASEAN Expos, with China-ASEAN business & Investment Summit, inviting thousands of ASEAN-companies, signing a lot of investment agreements. Where people to people interactions and business elites from ASEAN and China in forums and meetings, promoting links, even of Small and Medium enterprises of both economies.

While, Chinese leaders use to emphasize its intends to strengthen mutual political trust and economic cooperation with its neighbors. China drives an economic first approach between China and ASEAN. At the same time, its aid is improving considerable in favor of ASEAN, the number of Chinese tourists also is rising in the ASEAN region, around 30%. Annually, according some calculations. While, China is building a lot of Confucius Institutes in various countries.

The situation suggest unfair, since China has never been aggressive with ASEAN. Even in 2003, China signed an Treaty of Amity of Cooperation, indicating China’s commitment to respect ASEAN’s principles: sovereignty and non-interference in each other’s internal affairs, and settlement of disputes in a peaceful manner.

However, to get a successful cooperation it is necessary that China must support ASEAN to get high and sustainable economic growth and must remove these Southeast Asia fears and suspicious. Simultaneously, ASEAN leaders, who talk with one voice, are able to help China make friends in all the globe.