Free trade, AI make China-ASEAN economic cooperation closer, more fruitful
News Summary
Amidst global uncertainties and rising protectionism, China and the Association of Southeast Asian Nations (ASEAN) are forging ahead to deepen their regional economic integration. The China-ASEAN Free Trade Area (CAFTA) 3.0 upgrade negotiations were fully concluded in May 2025, with the new pact extending cooperation to areas such as the digital economy, green development, and supply chain connectivity. The 22nd China-ASEAN Expo, which opened on September 17 in Nanning, Guangxi, China, attracted over 3,200 exhibitors from 60 countries. This year's expo prominently featured pavilions dedicated to AI, new quality productive forces, the blue economy, and exhibitions on green and low-carbon technologies and new energy vehicles, underscoring the significant growth prospects in advanced manufacturing and digital infrastructure cooperation between China and ASEAN. Guangxi, as China's southern gateway, is at the forefront of these cross-border initiatives. AI is emerging as a linchpin for future collaboration, with ASEAN countries embracing digital transformation and showing strong desire for deeper cooperation with China. Illustratively, in April 2025, Guangxi Beitou IT Innovation Technology Investment Group partnered with MY E.G. Services Berhad, a Malaysian digital services company, to develop an AI innovation and cooperation center. Additionally, the China-ASEAN Artificial Intelligence Collaborative Innovation Center in Nanning has signed contracts with 16 ASEAN enterprises to boost industrial upgrading. China has been ASEAN's largest trading partner for 16 consecutive years, while ASEAN has been China's largest trading partner for five straight years, showcasing the stability of their cooperation amidst global volatility.
Background
The global economy is currently experiencing significant uncertainties, with geopolitical tensions and protectionist policies on the rise, leading to increased volatility in the global trade environment. Against this backdrop, regional economic blocs are seeking stability and growth through deeper internal integration. Economic relations between China and ASEAN have historically been very strong. China has been ASEAN's largest trading partner for 16 consecutive years, and ASEAN has been China's largest trading partner for five straight years. This highlights the high strategic importance and resilience of their trade and investment ties, providing a solid foundation for further deepening cooperation.
In-Depth AI Insights
What are the deeper geopolitical drivers behind China's deepening economic and technological integration with ASEAN amidst rising global protectionism and the Trump administration's 'America First' policies? - China's deepening cooperation with ASEAN is not merely an economic hedge against global trade fragmentation but a strategic deployment to build regional resilience and geopolitical influence. In an era of supply chain restructuring and critical technology competition, securing regional stability and interconnectedness is paramount for China. - Given the Trump administration's protectionist inclinations, China likely views ASEAN as a crucial partner in its Belt and Road Initiative and its broader efforts to shape a regional economic order. Through the CAFTA 3.0 upgrade, China aims to solidify its economic dominance in Southeast Asia and enhance its influence over standard-setting in high-value sectors like the digital economy, green technology, and advanced manufacturing. - This integration helps create a more China-centric economic gravity that challenges U.S. influence in the Indo-Pacific, especially as the U.S. may tighten its trade and technology policies. For ASEAN, deeper engagement with China offers economic growth and technological upgrading opportunities but also potentially increases economic reliance on China. How does China's emphasis on the digital economy, AI, and green development in the upgraded CAFTA 3.0 serve its strategic interests in consolidating regional supply chains and technological leadership? - Prioritizing the digital economy and AI aims to integrate ASEAN countries more deeply into China's technological ecosystem and digital infrastructure. By promoting Chinese standards and technological solutions (e.g., 5G, blockchain), China can establish technological dependencies and barriers within the region, securing its tech advantage and dominant position in data flow. - Collaboration in green development and New Energy Vehicles (NEVs) not only aligns with global sustainability trends but also provides overseas markets for China's surplus green production capacity and helps China secure a more prominent position in global green technology supply chains. This contributes to establishing international examples of China's 'new quality productive forces'. - These strategic investments are designed to embed ASEAN industries within China-centric regional supply chains, particularly for critical raw materials, intermediate goods, and high-tech components, thereby enhancing regional economic resilience and reducing reliance on Western supply chains. This forms an external pillar of China's 'dual circulation' economic strategy. Considering this accelerated China-ASEAN integration, what are the potential investment risks and opportunities for non-Chinese firms, particularly those from the U.S., Europe, and Japan, operating in or seeking to enter the ASEAN market? - Risks: As China-ASEAN economic integration deepens, non-Chinese firms may face increasing competition, especially in sectors where China has a competitive edge, such as the digital economy, AI, and NEVs. The CAFTA 3.0 upgrade could lead to more favorable policies and market access for intra-regional businesses, potentially disadvantaging external players. - Opportunities: There are still specific opportunities for non-Chinese firms seeking to leverage the growing China-ASEAN market and supply chain advantages. These firms can explore strategic partnerships with Chinese or local ASEAN entities to co-develop products or services tailored to regional demand. Furthermore, in niche high-tech or premium service sectors where unique value can be provided that Chinese and ASEAN firms do not yet offer, there remains entry space. - Crucially, non-Chinese firms must re-evaluate their regional strategies to adapt to an increasingly integrated, China-influenced Southeast Asian market. This may entail a deeper understanding of regional policies and adjusting supply chain and market approaches to navigate potential trade barriers and competitive pressures.