ABR-11344.pdf

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Archives of Business Research – Vol. 9, No. 12

Publication Date: December 25, 2021

DOI:10.14738/abr.912.11344. Feng, H., Wu, J., & Squires, V. R. (2021). China Looks To ASEAN For Closer Ties, Freer Trade, And More Harmonious Relations: A

Commentary. Archives of Business Research, 9(12). 91-103.

Services for Science and Education – United Kingdom

China Looks To ASEAN For Closer Ties, Freer Trade, And More

Harmonious Relations: A Commentary

Haiying Feng

Qinzhou Development Institute

BeiBu Gulf University, Qinzhou, 535011, Guangxi, China

Jingji Wu

School of Economics and Management

Beibu Gulf University, Qinzhou 535011, Guangxi, China

Victor R. Squires

Formerly, University of Adelaide, Australia

ABSTRACT

This paper is in three main parts. Firstly, we summarize key features of the history

of trade relationships between the People’s Republic of China (PRC) and the

Association of South East Asian countries (ASEAN). This includes a brief

examination of the different visions held by ASEAN and PRC and the implications for

the various trade partners. In the second part we turn our focus to the Guangxi

Zhuang Autonomous Region (GAZR) that is on the shores of the South China Sea and

a key region being developed as the Beibu Gulf Economic Rim. The port city of

Qinzhou is the nearest deep-water port to the ASEAN countries like Malaysia,

Vietnam, Philippines etc and lies at the eastern end of the Southern Transport

Corridor (STC) that links Lanzhou on the Yellow River in NW China, to the coast.

Finally, we present a cameo on Qinzhou’s Free Trade Port Areas and their role in

the ASEAN–China Free Trade Agreement (ACFTA).

Key words: Belt and Road Initiative, trade agreements, transport corridors, port facilities,

BeiBu Gulf, Gulf of Tonkin, investment, free ports

INTRODUCTION

To many people in China and abroad the idea that Guangxi Zhuang Autonomous Region (GZAR),

a coastal region in south China, would be a key part of China’s bold ‘Go west’ strategy to boost

its less developed western regions would be surprizing. The objective of paper is to show the

connection and to emphasize the importance of BeiBu Gulf (also called Gulf of Tonkin) in the

overall western development strategy. China’s “Go West” Strategy also called Great Western

Development Strategy Program, is a policy adopted to develop the western regions. The policy

covers six provinces (shaded dark blue) This region contains 71.4% of mainland China's area,

but only 28.8% of its population, and 19.9% of its total economic output.

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Archives of Business Research (ABR) Vol. 9, Issue 12, December-2021

Services for Science and Education – United Kingdom

Fig.1 China’s population is not evenly distributed and the eastern provinces and regions have a

disproportionate share of people and wealth derived from economic output.

The government of China is trying to increase trade in goods and, increasingly, services with

southeast Asia as part of a strategy to boost the economies of poorer southwestern regions such

as Guangxi in south China and those inland provinces/regions in western and north western

China. A key plank in China’s program is to reach out to the 10 countries that make up the

Association of South East Asian countries (ASEAN).

Context and setting

The Association of Southeast Asian Nations (ASEAN) is a regional grouping that promotes

economic, political, and security cooperation among its ten members: Brunei, Cambodia,

Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam (Fig

1.MAP).

Fig.2 ASEAN countries (shown in blue and in yellow) are close neighbors of China

ASEAN countries have a population of nearly 640 million people and a combined GDP in 2012

of $2.57 trillion 1 . The group has spurred economic integration, signing six free-trade

agreements with other regional economies. In November 2004, at the 10th ASEAN Summit

in Vientiane, Lao PDR, the Economic Ministers of ASEAN and China signed the Agreement on

Trade in Goods (TIG) of the Framework Agreement on Comprehensive Economic Cooperation

between ASEAN and China. This ASEAN–China Free Trade Agreement (ACFTA). ACFTA in

mainly about goods but has been augmented by services (education) and investments. The 15th

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Feng, H., Wu, J., & Squires, V. R. (2021). China Looks To ASEAN For Closer Ties, Freer Trade, And More Harmonious Relations: A Commentary. Archives

of Business Research, 9(12). 91-103.

URL: http://dx.doi.org/10.14738/abr.912.11344

anniversary of the China-ASEAN strategic partnership occurred in 2018 and China had become

ASEAN's third largest source of foreign direct investment by 2020. The economic stakes in the

China-ASEAN relationship are big for both sides. China has been ASEAN's top trading partner

for eight consecutive years with year on year increases in the volume and value of trade under

ACFTA. In 2020, ASEAN became Chin’s largest trading partner for the first time, with trade

volume at S742.8 billion, despite the Covid epidemic. Notwithstanding the success of the ACFTA

there are some tensions within and between the parties to the agreement. Part of this relates

to the different vision promoted by each side and by continuing tensions over territorial waters

that relate to shipping, fishing and mineral (notably oil and gas) exploration. But mounting

maritime disputes in the South China Sea mean the prospects for the largest free trade area in

the developing world remain unclear. ASEAN and China have for years been negotiating a code

of conduct for handling matters in the South China Sea but there has been no agreed outcome.

China remains a crucial market for South East Asian countries as well as a source of investment,

and ASEAN has sought to avoid conflict with Beijing. China and ASEAN have become each

other’s major trading partner. The Regional Comprehensive Economic Partnership, the world’s

largest free trade agreement is due to start on January 1, 2022. The pact has been signed by all

10 ASEAN countries as well as China five other Asia-Pacific nations. ASEAN realized the ASEAN

Economic Community (AEC) at the end of 2015. The AEC is an economic integration whose

goals are free movement of goods and services, investment, skilled workers and free movement

of capital. Following the establishment of the ACAFTA deepened its economic integration

through the AEC. Although ASEAN’s economic integration has various issues, as a whole, it can

be evaluated as successful, despite the different visions each side presents.

CONTRASTING VISIONS FOR CHINA-ASEAN PARTNERSHIPS

ASEAN’s Vision

ASEAN countries have a vision for greater physical, institutional, and people-to-people linkages

among its ten member countries. Its Master Plan on ASEAN Connectivity 2025 proposes

connecting its members with new hard and soft infrastructure. Maritime countries Brunei

Darussalam, Indonesia, Malaysia, the Philippines, and Singapore are strengthening the ASEAN

Maritime Economic Corridor with improved ports. On the mainland, Cambodia, Laos, Myanmar,

Thailand, and Vietnam are upgrading highways through the Greater Mekong Subregion

Economic Corridor and railways through the ASEAN Rail Corridor, which includes the

Singapore-Kunming Rail Link that connects to China’s Southern Transport Corridor (STC). The

full name of the Southern Transport Corridor is the China-Singapore (Chongqing) Connectivity

Initiative Southern Transport Corridor. A joint venture between China and Singapore, it is

positioned as a new strategic pivot in Southwest and Central China's opening-up. The corridor

is expected to offer a shorter, quicker and cheaper trade route between western China and

Southeast Asia, helping the region expand its economic cooperation with Europe and the rest

of the world. According to Guangxi's government, construction of the Southern Transport

Corridor will be an important part of the effort and will serve the country's Belt and Road

Initiative and promoting trade. The corridor helps shorten the distance and saves time in

shipping goods from the western region to Southeast Asia. More importantly, it helps expand

the economic and trade exchanges with ASEAN countries, promote the western region's

opening up and development.

When successfully integrated, the network known as the Southern Transport Corridor will

connect the south-western city of Chongqing and its neighbouring Guangxi autonomous region,

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Archives of Business Research (ABR) Vol. 9, Issue 12, December-2021

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by 0.3 percent or by US 2.2 billion in absolute terms. Against the backdrop of rising

protectionism, China and ASEAN have been staunchly upholding rules-based multilateral

trading system and earnestly promoting regional integration.

However, it must be noted that the ensuing intensified competition in each region’s domestic

market given the similarity in industrial structures of ASEAN and China may entail short-run

costs in the form of displacement of workers and rationalization of some industries and firms.

And as such, there would be the need for adjustments amongst workers and enterprises,

particularly the small and medium enterprises. China wages – and the associated welfare costs

– have been rising by an average of 15 percent per annum for the past six years, and those profit

margins are fast being eroded. As the cost of manufacturing in China continues to rise, the

search for ever-more competitive products becomes increasingly important.

Fig.5 Comparison of wage levels vis a vis GDP in China, and several other south Asian countries

[Used with permission]

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Archives of Business Research (ABR) Vol. 9, Issue 12, December-2021

Services for Science and Education – United Kingdom

population of 12.55 million. The proposed Guangxi Beibu Gulf Cities Development Project is key

to implementing the _Guangxi Beibu Gulf Economic Zone Development Plan_ (GBGEZDP), by

improving the urban investment climate and promoting international trade and commerce and

sustainable economic development with appropriate environmental management. The project

covers the three cities of Beihai, Qinzhou, and Fangchenggang, with total land area of 20,300

km2 and with 6 million people. The city areas of Beihai, Qinzhou, and Fangchenggang are 3,337

km2, 10,800 km2 and 6,181 km2, respectively. Their total populations are 1.58, 3.65, and 0.84

million people, respectively.

Qinzhou Bonded Port Area (see below) is among many facilities designed to boost cross- regional trade (Fig. 7) Investment in Qinzhou port on the Guangxi coast has been increased to

help achieve this goal. The long-planned trade agreement between China and ASEAN countries

has put Guangxi Zhuang autonomous region on the frontline of the world's most populous free

trade area (FTA). The GAZR government aims to greatly improve cross-regional cooperation

and to seize the prime opportunity for development. The economic stakes in the China-ASEAN

relationship are big for both sides. China has been ASEAN's top trading partner for eight

consecutive years. ASEAN, meanwhile, has been China's No. 3 trading partner for the past seven

years. China was also ASEAN's third largest source of foreign direct investment last year, while

ASEAN as a whole was China's largest source of foreign investment.

Qinzhou and other Guangxi Free Trade Port Areas

Both China and ASEAN see strengthening their commitment to an interconnected world,

reaffirming a commitment to free and open trade, and upholding a commitment to a rules-based

international order as imperatives. Initiatives to boost the commitment of both sides to an

interconnected world include a new China-Singapore (Chongqing) Connectivity Southern

Transport Corridor that would save 1,300 kilometers from traditional shipping routes. The

corridor is expected to offer a shorter, quicker and cheaper trade route between western China

and Southeast Asia, helping the region expand its economic cooperation with Europe and the

rest of the world. Since China and Singapore began working together on the Southern

Transport Corridor (STC) in 2017, a complementary project linking western regions in China

with the 21st Century Maritime Silk Road, the gulf area has become a major pathway in this

ambitious transport plan The Southern Transport Corridor (STC) is an important artery linking

China's western provinces to ASEAN countries through the Beibu Gulf in South China's Guangxi.

By this route, goods coming from the western provinces of China can be shipped to Singapore

by road, railway and waterways. The route also connects Europe to Southeast Asia, with

Chongqing as the vital railway link.

Qinzhou, a modern coastal city in south China's Guangxi Zhuang Autonomous Region, is

booming due to its free-trade port based on industrial cooperation., Qinzhou Port is one of the

closest Chinese ports to ASEAN countries and a coastline of 86 kilometers. Currently, there is

one sea channel with a handling capacity of 100,000 tons and 15 10,000-ton-above capacity

berths, among which four have a high capacity. Regular shipping lanes have so been operating

between Qinzhou, Hong Kong, and Hai Phong, as well as Guangzhou, Shenzhen, Quanzhou and

Tianjin. More routes are being opened to ports of ASEAN countries. Sea links connecting

Qinzhou with Singapore and Malaysia were opened in the first half of 2011.

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Feng, H., Wu, J., & Squires, V. R. (2021). China Looks To ASEAN For Closer Ties, Freer Trade, And More Harmonious Relations: A Commentary. Archives

of Business Research, 9(12). 91-103.

URL: http://dx.doi.org/10.14738/abr.912.11344

The Qinzhou Free Trade Port Area is the sixth established in China and also the closest to ASEAN

countries. It aims at businesses of international transfer, international procurement and

distribution, import and export, transit trade, as well as export-oriented processing.. Located at

the center of Beibu Gulf Economic Zone, it is right on the doorstep to the China-ASEAN Free

Trade Area. It will become a new hot spot for China-ASEAN industrial cooperation. Guangxi

Zhuang Autonomous Region has moved quickly to facilitate the construction of the STC,

ensuring the exchange of goods between China and Southeast Asia and further releasing the

market potential of trade between the two regions. As an initiative to create the coastal

industrial areas to take full advantage of maritime trade with neighboring ASEAN countries,

China has developed Qinzhou port in GZAR as one of the key gateways to Thailand, Malaysia

and Singapore and beyond. Qinzhou Port is the only foreign trade container port in GZAR. It is

the container hub for Beibu Gulf. The Qinzhou port, with its 24 domestic and foreign trade

shipping lines, plays an important role in the bilateral trade between China and ASEAN. From

October, 2015, all foreign container trade was transferred to the Qinzhou port. Before 2015, the

throughput of Qinzhou port was 6.51 million tons. The capacity has increased and gross

tonnage in 2018 exceeded 9420 thousand TEU3 with 1 berth, 360 meter berth length and 13 ha

terminal area. The Qinzhou Port has been increasing its investment in large-scale, purpose- specific and intelligent container terminals. In 2019, container throughput of Qinzhou

Port exceeded 1 million TEU 4 s . In the first half of 2019, Qinzhou Port completed a cargo

throughput of 57.09 million tons, a year-on-year increase of 21.1 percent. Its container

throughput reached 1.27 million TEUs by the end of 2019, an increase of 25.4 percent. The

Qinzhou bonded area is now the country’s only entry point for whole-car imports with about

50,000 vehicles per year as roll-on-roll off (ro-ro). The port of Qinzhou is at the core of the Beibu

Gulf Economic Zone in GZAR. This is due to its proximity with Vietnam and other South East

Asian nations. It is now a major free trade zone. As a new sub-regional cooperation project

within the frame of China- Association of Southeast Asian Nations (ASEAN) free trade zone,

Pan-Beibu Gulf Economic Cooperation (PBGEC) has become a hot issue for both China and

ASEAN countries.

Since the 1990s, the Chinese government has approved dozens of bonded zones to facilitate

economic exchanges with overseas countries and regions. In 2008, the Guangxi regional

government built several bonded areas including the Qinzhou Bonded Port Zone, the Pingxiang

Comprehensive Bonded Zone, the Nanning Bonded Logistics Center and the Beihai Export

Processing Zone. The Qinzhou Bonded Port Zone is one of China's largest bonded port zones

with a designed area of 10 sq km. The first phase of its construction costs 2.82 billion yuan and

covers 2.5 sq km. In the area of free trade, ASEAN and China are working to upgrade a ASEAN- China Free Trade Area Agreement. The China/Malaysia, Qinzhou Industrial Park are examples.

And the two sides at the 21st ASEAN-China Summit in November 2018 adopted the ASEAN- China Strategic Partnership 2030 statement setting out a new guide for cooperation.

Establishment of the ACFTA is good for the development of GZAR bonded logistics system,

while the system in turn helps shorten the distance between the FTA and the world.

3 TEU stands for Twenty-Foot Equivalent Unit which can be used to measure a ship's cargo carrying capacity. The dimensions of

one TEU are equal to that of a standard 20 foot shipping container. (20 feet [610 cm] long, 8 feet [245 cm] tall) 4 To put this in some perspective, the Port of Melbourne, Australia (one of the top four container ports in the southern

hemisphere) handles around 2.93 million TEU annually.

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Feng, H., Wu, J., & Squires, V. R. (2021). China Looks To ASEAN For Closer Ties, Freer Trade, And More Harmonious Relations: A Commentary. Archives

of Business Research, 9(12). 91-103.

URL: http://dx.doi.org/10.14738/abr.912.11344

The GZAR and China central governments are constructing new road and rail routes5 to and

from Beibu Gulf ports and are improving interchanges for freight traffic around urban areas for

the BeiBu Gulf’s new iron and steel industrial complexes. Port capacity expansion depends on

road and rail capacity expansion within China and in neighboring Vietnam and other countries

in the Mekong Development zone that includes Vietnam Myanmar, Lao FDR, Cambodia, and

Thailand. Rail links (existing and under construction) through the Mekong region will augment

shipping.

SUMMARY AND CONCLUSION

Further far-reaching benefits can flow to the participants of the ACFTA and the pace and

magnitude of economic growth that will flow from the linking of the coastal regions in GZAR

and the inland and western centers deep in China’s hinterland will continue to astound

observers. China has repeatedly sought to overcome concerns about its rising power and

influence in the region, particularly its claim to virtually the entire South China Sea that

overlaps the claims of ASEAN members Malaysia, Vietnam, Brunei and the Philippines. China

remains a crucial market for ASEAN countries as well as a source of investment, and ASEAN has

sought to avoid conflict with Beijing. The summit emphasized the economic links that have

made China ASEAN’s biggest trading partner for the past 12 years. Trade has grown from $8.36

billion in 1991 to more than $685.28 billion in 2020. Over the same period, two-way cumulative

investment has also exceeded $310 billion, making China the fourth largest source of foreign

direct investment among all ASEAN dialogue partners.

The coming years could mark a turning point in the ASEAN-China relationship. ASEAN

members are shifting from complementing to competing with China’s economic activity,

expanding their exports to Western markets while attracting foreign investment from

multinational corporations that in the past turned to China as their preferred site for low-cost

manufacturing. China’s real wages are increasing (Fig. 5, in tandem with an aging society -- a

byproduct of the One-Child Policy. In parallel, ASEAN’s developing members will experience

the rise of a consumer-oriented middle class, which could shift economic activity from export- oriented manufacturing toward domestic consumption. ASEAN could also become a leading

service provider to China’s rising middle class. Tourism is an important source of services

exports for many ASEAN countries, particularly Thailand. In 2012 (latest data available)

Chinese tourists made up the second-largest group visiting ASEAN countries, totaling just under

ten million visitors (10.4 percent of total tourism). Prosperity for ASEAN partners is assured

under the new arrangements that were endorsed at the November 2021 summit of key ASEAN

leaders and China’s President Xi Jinping6.

5 Including a new highspeed freight line of 2025 km from Qinzhou on the coast to Lanzhou, capital of Gansu province

in NW China, that opens the way to import and export. Travel time has been reduced from 29 hours to 17 hours on the

freight -dedicated highspeed line. GZAR had extended high-speed railways to all prefecture cities by the end of 2020. Already

1700 km of lines have been completed and more track will be laid.

6 Remarks made by Chinese President Xi Jin Ping during a virtual conference with the members of ASEAN, held to m

ark the 30th anniversary of relations between China and the grouping.

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Feng, H., Wu, J., & Squires, V. R. (2021). China Looks To ASEAN For Closer Ties, Freer Trade, And More Harmonious Relations: A Commentary. Archives

of Business Research, 9(12). 91-103.

URL: http://dx.doi.org/10.14738/abr.912.11344

Impor

Balan

(108

(1074

(1412

(1139

Thailand Expor

Impor

Balan

1170

2423

(125

8829

5754

(5000)

25636

14387

10116

32738

31479

5780

43556

51872

(1316)

10.7

19.2

12.4

18.6

13.6

21.9

13.4

19.3

12.7

24.9

The

Philippin

Expor

Impor

Balan

2423

517

982

8829

6309

(3215)

25636

19508

(1042

3518

18205

(1468

34212

17926

17396

13.7

4.1

10.8

13.3

8.81

16.7

9.76

9.21

12.3

17.9

Low Income

Burma

Myanma

Expor

Impor

Balan

970

n.a.

1979

170

1829

7439

645

6794

n.a.

2810

n.a

8724

3415

5309

n.a.

2.9

0.4

1.7

0.6

3.0

1.4

3.7

4.2

Cambodi

Expor

Impor

Balan

n.a.

295

269

1095

1056

3411

361

3050

5123

n.a

n.a.

1.0

0.1

1.0

1.4

0.2

1.6

0.3

Lao PR Expor

Impor

Balan

n.a.

149

119

1021

982

361

n.a

n.a.

n.a

0.1

0.2 0.2 n.a

VietNam Expor

Impor

Balan

1024

806

3180

1725

15139

10797

48599

31714

62346

38942

9.4%

1.7

10.3

3.7

15.5

3.9

19.9

13.9

21.8

18.5

Data Sources: China Ministry of commerce via CEIC database.