Assignment on Asean-China Economic Relations in the Twenty-First Century

Foreign trade is an important driving force for the economic development of China and ASEAN. In the 1990s, both China and ASEAN achieved high growth rates in foreign trade. During the decade from 1991 to 2000, China’s foreign trade grew at an average annual rate of 15 per cent. In 2000, China’s exports amounted to US $249.2 billion and its imports totaled US $225.1 billion. During the period from 1993 to 2000, ASEAN’s foreign trade grew at an average annual rate of 10.9 per cent, although the rate was lowered during the financial crisis. In 2000, ASEAN-China trade totaled US $39.5 billion growing by an average of 20.4 percent annually since 1991 when overall trade amounted to only US $ 7.9 billion. China’s exports to ASEAN grew from US $ 4.1 billion in 1991 to US $ 17.3 billion in 2000 while its imports from ASEAN grew from US $ 3.8 billion in 1991 to US $ 22.2 in 2000.
ASEAN’s position in China’s market has been on the rise with its proportion in China’s total exports increasing from 5.7 per cent in 1991 to 6.9 per cent in 2000 and its proportion in China’s total imports rising from 6 per cent in 1991 to 9.9 per cent in 2000. ASEAN is now China’s fifth biggest trading partner, next only to Japan, the USA, the European Union and Hong Kong. On the other hand, the share of China in ASEAN-64 exports grew from 2.2 per cent in 1993 to 3.14 per cent in 2000 while the share of China in ASEAN-6 imports grew from 1.9 per cent in 1993 to 5.2 per cent in 2000. The relatively small share of China in the trade of the older and more developed ASEAN countries has to be balanced with the appreciation of the importance of China to the border trade of Laos, Myanmar and Viet Nam, all of whom share a common border with China. Anecdotal evidence suggests that it is an important element of the economic relationship of the new ASEAN members5 with China.

There is potential for further growth in these shares given that both regions’ trade are largely oriented to the developed countries. Exports to the US, EU and Japan were 20.5 percent, 16.3 percent and 11.0 percent respectively of ASEAN-6 exports in the year 1999. The three countries also represented 16.3 percent, 12.3 percent and 18.3 percent of ASEAN-6 imports in the year 1999. In the case of China, exports to the US, EU and Japan accounted for 21.5 percent, 15.5 percent and 16.6 percent respectively of its exports in 1999.[1]

A major reason for the rapid growth of ASEAN-China trade during the 1990s was the dynamism of the economies of ASEAN and China. During the period from 1990-2000, China’s real GDP grew by an average of 10.1 per cent, and up until 1997, ASEAN’s regional GDP was growing at an annual average rate of 6.8 per cent. Secondly, MFN tariff rates have been falling in both ASEAN and China. At the beginning of 1993, China reduced its tariffs on 3,371 import items and abolished import controls on more than 367 commodities. This action reduced the trade-weighted average tariffs of China by 7.3 percent (Zhang and Warr, 1995).6 At the 1995 Asia Pacific Economic Cooperation meeting, China's President Jiang Zemin further made a commitment to cut average tariffs to 15% by 2000. This new liberalization effort includes substantial tariff cuts on 4,998 tariff lines. China has also eliminated quotas, licensing and other import controls on 176 tariff lines, or more than 30 percent of commodities subject to these restrictions. Based on available data, the average tariff rate in China is 15.1 percent. However, the maximum tariff rate does not exceed 80 percent. About thirty percent of the tariff lines have rates above 20 percent and the highest tariff rates are applied to prepared foodstuffs, vehicles, textiles and apparel, footwear, fats and oils. Except for fats and oils, the other products have not figured highly as major ASEAN exports to China.