The Sixth ASEAN-China Summit in Cambodia in 2002 is a milestone of regional economic cooperation for China and for the whole East Asian region. The Framework Agreement on ASEAN-China Economic Cooperation (FAACEC) was signed, and ASEAN and China agreed to establish a Free Trade Area within ten years. This is an institutional response to the leaders’ agreement one year ago.

The decision of the leaders to establish a free trade area demonstrates that the economic and political relations between ASEAN and China has been further enhanced, and the mutual trust and the interdependence on each other will be further deepened. The decision by the leaders was a natural response to a number of important global and regional developments during the past decade, such as the dramatic growth in the number of regional trading arrangements, China's economic emergence and the 1997 financial and economic crisis.

One of the most important results in the framework agreement is the “early harvest” programme, which has already taken effect from 1 January 2004. Some significant benefits have already been demonstrated.

This chapter maps out the future direction of the ASEAN-China FTA by reviewing the trade and economic cooperation between ASEAN and China, as well as the benefits achieved from this specific FTA.

DEVELOPMENT OF TRADE AND ECONOMIC COOPERATION BETWEEN ASEAN AND CHINA

The increasingly closer economic and trade relations, besides the active promotion by the leaders, could be considered the basis for reaching consensus on the establishment of the Free Trade Area within ten years.

Trade between ASEAN and China Greatly Increased

ASEAN and China are important trade partners for each other. ASEAN is China's fifth largest trade partner, and China is ASEAN's sixth largest partner. From 1990 to 2003, the average annual growth rate in trade between ASEAN and China was 20.82 per cent. China's export to ASEAN increased from the US$3.7 billion in 1990 to US$30.9 billion in 2003, and its import from ASEAN increased from the US$3.0 billion in 1990 to US$47.3 billion in 2003. During these fourteen years, the average annual growth rate of China's import from ASEAN increased by 23.78 per cent, faster than that of China's export to ASEAN.