Get ready, get set … trade! China’s push into ASEAN: Things to note

From component manufacturing in Malaysia to power and oil and gas projects in Myanmar, the ASEAN region has seen an influx of Chinese investments. Over the last few years, China-ASEAN relations have topped the international investment agenda for both sides. China’s recently announced plan to upgrade and expand the ASEAN-China Free Trade Agreement (ACFTA) by November this year demonstrates just one of the many steps China is taking to engage with the region. The expanded ACFTA builds upon commitments from the original ACFTA signed in 2010 and seeks further tariff reductions and increased avenues for cooperation in areas such as customs procedures and trade facilitation.

China’s continuing rise and the One Belt, One Road and the New Silk Road plans announced by China’s leadership in late 2013 exert a powerful push for Chinese investments into ASEAN economies. Since 2009, China has been ASEAN’s largest trading partner, while ASEAN has been the third-largest trading partner of China since 2011. Bilateral trade between China and ASEAN totalled US$480 billion in 2014 and is expected to hit US$500 billion this year.

Venturing into the ASEAN region is now seen as a survival essential for many Chinese investors. According to an IMF study comparing global real GDP growth from 2000 to 2013, ASEAN had the third largest growth rate, just behind China and India. But before jumping on the ASEAN bandwagon, investors should first consider whether they have sufficient knowledge of ASEAN and are equipped to deal with the diverse regulatory environments within the region?

Chia Kim Huat is regional head of Rajah & Tann Asia’s corporate and transactional practice. He can be contacted on +65 6232 0464 or by e-mail at kim.huat.chia@rajahtann.com

Andrew Ong is deputy CEO of Rajah & Tann Asia. He can be contacted on +65 6232 0259 or by e-mail at andrew.c.ong@rajahtann.com