As both China and ASEAN have gained substantially from globalization, they should intensify cooperation for implementing the WTO Trade Facilitation Agreement

Since the founding of the People’s Republic of China in 1949, the aspiration for national rejuvenation has remained deeply embedded in the collective consciousness of the Chinese people. The reform and opening-up policy initiated in 1978 has proven highly successful, significantly advancing the realization of this long-held ambition. Building on this, in 2012, the 18th National Congress of the Communist Party of China articulated the “Two Centennial Goals”. China’s evolving opening-up strategy is a central pillar of this long-term blueprint. A fundamental principle is maintaining regional peace and cooperation, alongside active participation in globalization.

China’s accession to the World Trade Organization in 2001 marked a pivotal milestone, attracting substantial foreign direct investment and propelling the country into its role as the “factory of the world”. This integration facilitated the transfer of advanced technologies and significantly enhanced China’s production capacity. The benefits included improved external stability, sustained high economic growth and accelerated market-oriented reforms.

Economic growth in China has now shifted gear to a new normal. The newly mapped-out Recommendations of the 20th Central Committee of the CPC for Formulating the 15th Five-Year Plan (2026-30) for National Economic and Social Development place significant emphasis on expanding higher-standard openness and integrating it with both development and security.

China’s influence in Southeast Asia is not a new phenomenon. China became a full dialogue partner of the Association of Southeast Asian Nations in 1996. Relations deepened markedly following the Asian financial crisis in 1997-98, when China contributed to regional stability by committing to not devaluating its currency. China’s accession to the WTO in December 2001 further accelerated regional engagement. Soon after, China proposed the establishment of the ASEAN-China Free Trade Area. The foundations of regional cooperation are now based on multi-layered structures ranging from the bilateral level to the regional level, such as ASEAN+1, ASEAN+3 and the Regional Comprehensive Economic Partnership.

The ACFTA officially came into force in 2010. Several factors contributed to the rapid expansion of China-ASEAN economic relations. First, the strong economic growth of both sides acted as a key driver. China’s real GDP grew at an average annual rate of around 10 percent between 1990 and 2000. Second, reductions in tariff rates facilitated trade expansion. In July 2005, China reduced its average tariff rate on ASEAN imports from 9.9 percent to 8.1 percent. Third, improvements in trade facilitation significantly reduced transaction costs.

Over the past 25 years, China and ASEAN have developed a high degree of economic cooperation and integration. Between 1991 and 2015, China-ASEAN trade expanded from approximately $8 billion to $472.2 billion, making China ASEAN’s largest trading partner. Bilateral inward foreign direct investment stocks reached $160 billion. Regional frameworks have further strengthened shared interests.

In October 2025, ASEAN and China concluded negotiations on an upgraded free trade agreement, known as CAFTA 3.0. Since its implementation in 2010, CAFTA has played a major role in deepening economic ties. Bilateral trade rose from $231.1 billion in 2008 to approximately $982 billion in 2024. CAFTA 3.0 introduces nine additional chapters that address emerging areas such as the digital economy, green development and supply chain connectivity.

A defining feature is its strategic emphasis on digital technologies and green energy. From a technology and finance perspective, the agreement promotes greater transparency in regulations governing artificial intelligence and financial technology. This is particularly relevant for Malaysia’s ambition to emerge as a regional technology hub. Streamlined regulatory arrangements could facilitate deeper Malaysian involvement in China-led digital infrastructure initiatives, including smart city development and digital payment systems under the Belt and Road Initiative.

CAFTA 3.0 presents a meaningful opportunity for both Malaysia and ASEAN to recalibrate their economic strategies amid global uncertainty. It offers partial protection against geopolitical trade disruptions. Nevertheless, it should not be viewed as a comprehensive solution. ASEAN’s long-term economic stability will continue to depend on sustaining diversified partnerships. To maximize benefits, implementation must be strategic. Malaysian companies require tailored assistance. The advantages of enhanced transparency will only materialize with adequate investment in trade facilitation infrastructure and skills development.

Rising protectionism poses significant risks. Both China and ASEAN have gained substantially from globalization. They should intensify cooperation in implementing the WTO Trade Facilitation Agreement and advancing new initiatives to sustain an effective multilateral trading system. In East Asia, this also includes strengthening efforts to conclude and deepen the RCEP.

In principle, ASEAN stands to benefit from China’s expanding influence, which offers increased opportunities to integrate into regional trade networks, production chains and investment flows, thereby reinforcing regional economic integration. Managing this relationship proactively and through continued dialogue will be key to navigating future opportunities.

Advancements in transport and improved digital connectivity are expected to significantly reshape the region’s landscape. Such cross-border exchanges will generate mutual impacts. As China’s role continues to grow, a clear and shared understanding of this dynamic will support regional stability and prosperity.

A critical challenge remains the persistent gap between academic research, policy formulation and civil society engagement. This disconnect is likely to become more complex as regional identities strengthen in an increasingly globalized environment. Enhancing cross-border cooperation within ASEAN — through academic collaboration, policy coordination, and civil society interaction — will be essential to address future challenges. Such efforts will strengthen ASEAN’s collective capacity to engage constructively with all partners, ensuring that deeper ties with China contribute positively to ASEAN’s community-building and shared future.

The author is a professor of economics at Malaysia’s HELP University.

The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.