ASEAN urges deeper economic integration with China

MANILA, Philippines — Prospects for a broader and deeper integration between ASEAN economies and China in the coming decades are “bright” as these countries complement each other in their economic goals, according to a new report by the ASEAN+3 Macroeconomic Research Office (AMRO).

In a report titled “China’s Reform and Opening-Up Experiences, Prospects and Implications for ASEAN,” the regional macroeconomic surveillance organization said China has become an important engine of growth for ASEAN in the process of opening up to the global economy.

This is seen in the rising cross-border trade, investment and tourism in the ASEAN region in the past two decades. `

ASEAN, meanwhile, has become a “strategic partner and an important market to China.”

China is poised to reach high-income status in the coming years with a per capita GDP of around $22,000 in 2035, but it is still confronted by remaining challenges including those posed by the Fourth Industrial Revolution.

Others include population ageing, widening regional disparities and income inequality, high corporate sector debt and financial sector leverage, and environmental problems. External headwinds from trade and technology protectionism may also persist into the medium term, AMRO said.

The past 20 years saw greater integration between China and ASEAN economies because of the boom in China’s regional production networks which saw ASEAN countries becoming part of the supply chain.

“For both China and ASEAN, enhanced cooperation based on good understanding of each other’s needs, strengths, capacities and priorities will help deepen regional integration and boost mutual benefits,” AMRO in the report said.

AMRO said integration could be deepened by greater trade facilitation and the continued relocation of labor-intensive jobs and manufacturing activities from China to ASEAN as China moves further up the value chain.

As a share of China’s trade with the world, China-ASEAN trade is expected to rise from 10.4 percent in 2017 to 15.8 percent in 2035. Similarly, as a share of ASEAN’s trade to the rest of the world, China-ASEAN trade is expected to rise from 16.7 percent in 2017 to 20 percent in 2035, the report said.

ASEAN’s tourism revenue is also expected to grow rapidly because of the further rise in Chinese outbound tourism.

Not only is the number of Chinese tourists expected to grow from 24 million in 2017 to 104 million in 2035, the per-person expenditure of Chinese tourists in ASEAN will also rise sharply as China’s per capita income is projected to increase by 2.3 times from its current level by the year 2035.

AMRO said “broader and deeper economic cooperation, in particular through the Belt and Road Initiative, will foster FDI flows between China and ASEAN.”

“While the path of rising mutual benefits ahead has been paved by considerable efforts from both sides, enhanced cooperation, including in strengthening the regional financial safety net based on deeper understanding of each other’s needs and socio-economic contexts is crucial moving forward,” said the report.