China-ASEAN Trade and Investment Relations
China-ASEAN trade and investment 20+year surge and largest trading partners, Thai heiress Paetongtarn Shinawatra elected Thailand’s 31st PM, July 2024 World Bank Report on Thailand
China-ASEAN Trade and Investment Relations
China Briefing August 9, 2024
China-ASEAN trade and investment has surged over the last two decades, making ASEAN China’s largest trading partner. This growth, supported by trade agreements like the ASEAN-China Free Trade Area and RCEP, has deepened economic ties, boosted investments, and expanded cooperation across sectors such as manufacturing, green energy, and consumer electronics. We look at the latest bilateral trade and investment data to understand how this relationship has evolved.
ASEAN is a critical trade and investment partner for China due to its extensive geographic coverage, abundance of strategically important trade routes, large population, and rapidly expanding economy. In recent years, trade and investment between China and the 10 ASEAN member countries (Singapore, Indonesia, Malaysia, Thailand, Vietnam, Cambodia, Laos, Myanmar, Brunei, and The Philippines) have grown significantly, reflecting the deepening economic ties between the two regions. This growth has been bolstered by the signing of various trade and investment agreements, which have expanded cooperation and reduced trade barriers.
The partnership presents numerous opportunities for businesses in the region, enabling them to benefit from improved market access, increased competitiveness, and enhanced economic collaboration.
China-ASEAN trade
As a bloc, ASEAN is China’s largest trading partner, overtaking the EU in 2020. In 2023, trade with ASEAN countries accounted for 15.9 percent of China’s total foreign trade, with total bilateral trade reaching RMB 3.36 trillion (US$468.8 billion), an increase of 10.5 percent from the previous year. China continues to hold a trade surplus with ASEAN; in 2023, China exported RMB 2.03 trillion (US$283.2 billion) in goods to the 10 countries, up 14.2 percent year-on-year, and imported RMB 1.33 trillion (US$185.6 billion), up 5.2 percent year-on-year.
China’s largest trading partner within the bloc is Vietnam. In 2023, total trade between Vietnam and China reached RMB 1.6 trillion (US$223.2 billion). Of this, exports from China to Vietnam reached a total of RMB 968.4 billion (US$135.1 billion), while imports reached RMB 650.2 billion, leading to a trade surplus of RMB 318.2 billion (US$44.4 billion).
Six countries – Vietnam, Malaysia, Indonesia, Thailand, Singapore, and The Philippines– account for the vast majority of China’s trade with ASEAN. In 2023, the remaining four countries – Laos, Cambodia, Myanmar, and Brunei – accounted for just 5 percent of ASEAN’s trade with China.
Since 2022, Indonesia has taken over Thailand as the third biggest trading partner within the bloc – in 2023 accounting for 16.1 percent of ASEAN’s total trade with China to Thailand’s 14.6 percent.
According to the GAC, ASEAN is China’s largest trading partner for intermediate goods, with bilateral trade in intermediate goods amounting to US$4.13 trillion (US$576.2 billion) in 2023.
China and ASEAN have also deepened cooperation in industries such as green energy and consumer electronics, and China’s exports of lithium batteries and solar cells to ASEAN and imports of audio and video equipment parts have grown rapidly.
According to data from ICT Trade Map, China’s major exports to ASEAN countries in 2023 included electrical machinery and equipment, valued at US$128.66 billion, and nuclear reactors, boilers, machinery, and mechanical appliances at US$64.94 billion. Mineral fuels and mineral oils followed with US$20.05 billion, while exports of plastics and plastic articles were worth US$18.50 billion.
China’s Top Exports to ASEAN, 2023Product Value (US$ billion) Electrical machinery and equipment and parts thereof; sound recorders and reproducers, televisions; etc. 128.66 Nuclear reactors, boilers, machinery, and mechanical appliances; parts thereof 64.94 Mineral fuels, mineral oils, and products of their distillation; bituminous substances; etc. 20.05 Plastics and articles thereof 18.50 Iron and steel 18.01 Organic chemicals 14.13 Articles of iron or steel 13.94 Vehicles other than railway or tramway rolling stock, and parts and accessories thereof 13.06 Miscellaneous chemical products 10.01 Source: ICT Trade Map
Meanwhile, ASEAN remains an important source of imports of agricultural and energy products for China. Almost all of China’s palm oil imports come from Indonesia and Malaysia. According to ICT Trade Map, Chinese imports of animal, vegetable, or microbial fats and oils amounted to US$8.12 billion.
Countries such as Indonesia and Myanmar are also among China’s largest sources of coal and tin ore. China’s imports of mineral fuels, oils, and products of their distillation amounted to US$72.44 billion in 2023, per ICT Trade Map data.
China’s Top Imports from ASEAN, 2023Product Value (US$ billion) Electrical machinery and equipment and parts thereof; sound recorders and reproducers, televisions; etc. 117.15 Mineral fuels, mineral oils, and products of their distillation; bituminous substances; minerals; etc. 72.44 Nuclear reactors, boilers, machinery, and mechanical appliances; parts thereof 32.33 Iron and steel 18.66 Edible fruit and nuts; peel of citrus fruit or melons 11.54 Rubber and articles thereof 9.49 Plastics and articles thereof 9.17 Ores, slag, and ash 8.30 Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments or apparatus, parts thereof 8.17 Animal, vegetable, or microbial fats and oils and their cleavage products; prepared edible fats; etc. 8.12 Source: ICT Trade Map
China-ASEAN bilateral investment
Foreign investment between China and ASEAN countries has risen steadily over the past few decades. Chinese investment in ASEAN in particular has accelerated over the last decade, growing at a CAGR of 9.88 percent from 2013 to 2022. Growth in ASEAN countries’ investment in China has been more modest by comparison and is driven largely by Singapore, whose FDI flows to China grew at a CAGR of 10.4 percent over this same period.
According to data from China’s Ministry of Commerce (MOFCOM), as of July 2023, the accumulated two-way investment between China and ASEAN countries has surpassed US$380 billion.
Chinese FDI in ASEAN
According to MOFCOM’s 2022 Statistical Bulletin of China’s Outward Foreign Direct Investment, China’s direct investment in ASEAN countries in 2022 amounted to US$18.65 billion, a 5.5 percent decline from the previous year. This investment constituted 11.4 percent of China’s total foreign investment flow and 15 percent of its FDI flows to Asia. By the end of 2022, the cumulative stock of Chinese FDI in ASEAN reached US$154.66 billion, accounting for 5.6 percent of China’s global FDI stock and 8.4 percent of its FDI stock in Asia. China has established over 6,500 direct investment enterprises in ASEAN as of July 2023, employing more than 660,000 foreign workers.
Singapore was the largest recipient of Chinese investment in ASEAN in 2022, attracting US$8.3 billion, a slight decrease of 1.3 percent from the previous year. The investments were primarily directed towards wholesale and retail, manufacturing, finance, and other sectors. Indonesia followed with US$4.55 billion, a 4 percent increase, mainly in manufacturing, mining, and the production and supply of electricity, thermal energy, gas, and water. Vietnam was the third-largest recipient, with US$1.7 billion in investments, focusing on manufacturing, wholesale, and retail.
Singapore also holds the highest cumulative stock of Chinese investment at US$73.45 billion as of the end of 2022, mainly directed at leasing and business services, wholesale and retail, manufacturing, and financial services. Indonesia followed with US$24.72 billion, focusing on manufacturing, electricity, thermal energy, gas, and water production and supply, and mining. Malaysia was third with US$12.05 billion, targeting manufacturing, electricity, thermal energy, gas, and water production and supply, construction, and wholesale and retail.
Chinese FDI in ASEAN Countries, 2022Country FDI stocks (US$ billion) Proportion of total (%) Singapore 73.45 2.7 Indonesia 24.72 0.9 Malaysia 12.05 0.4 Vietnam 11.66 0.4 Thailand 10.57 0.4 The Philippines 3.42 0.1 Brunei 2.83 0.1 Cambodia 0.38 0 Laos 0.06 0 Myanmar 0.13 0 Source: 2022 Statistical Bulletin of China’s Outward Foreign Direct Investment, MOFCOM
Manufacturing was the primary sector for Chinese investment in ASEAN, receiving US$8.21 billion in 2022. Major destinations for these investments were Indonesia, Vietnam, Singapore, and Malaysia. The wholesale and retail sector saw US$4.2 billion in investments, marking a 32.4 percent increase from the previous year, with a significant portion directed towards Singapore. The mining sector received US$1.81 billion, skyrocketing 235.5 percent year-on-year, with investments mainly flowing into Singapore and Indonesia.
Investments in the production and supply of electricity, thermal energy, gas, and water amounted to US$1.58 billion, an 8.6 percent increase, with significant investments in Indonesia, Malaysia, and Singapore. The financial sector attracted US$940 million, up 44 percent, primarily directed towards Singapore. Other sectors such as leasing and business services, information transmission, software and IT services, education, and resident services also saw varying levels of investment.
Top ASEAN Industries for Chinese FDI, 2022
IndustryNew companies establishedProportion (%)Actual capital investment (US$)Proportion (%) Manufacturing 8.214449.2831.9Wholesale and retail 4.222.524.7716Leasing and business services 6.013.222.4814.5Mining1.819.757.333.7Electricity, heating, gas, and water production/supply1.588.59.516.1Finance0.9458.085.2Source: 2023 China Foreign Investment Statistical Bulletin, MOFCOM
In terms of cumulative stock by industry, manufacturing led with US$49.28 billion, distributed mainly across Indonesia, Singapore, Vietnam, Thailand, and Malaysia. Wholesale and retail followed with US$24.77 billion, primarily in Singapore, Malaysia, and Thailand, while leasing and business services saw US$22.49 billion, mostly in Singapore, Indonesia, and Laos.
Construction, financial services, transportation, warehousing, postal services, mining, agriculture, forestry, animal husbandry, and fisheries also attracted significant investments.
ASEAN FDI in China
In 2022, ASEAN countries’ FDI flows into China reached a total of US$11.91 billion, accounting for around 6.3 percent of China’s actual use of foreign capital. The vast majority – 89 percent – came from Singapore, which invested US$10.6 billion in China that year. Singapore also accounted for almost 85 percent of the accumulated FDI flows from ASEAN to China as of the end of 2022, and around 4.7 percent of China’s total accumulated FDI from the whole world.
The second largest source of FDI – Malaysia – accounted for a further 9 percent of the total in 2022 and 5.9 percent of the accumulated total.
ASEAN FDI Flows to China, 2022Country FDI flows (US$ billion) Proportion of total (world) (%) Accumulated FDI (US$ billion) Proportion of total (world) (%) Singapore 10.6 5.6 131.44 4.7 Indonesia 00.4 0 2.7 0.1 Malaysia 1.13 0.6 9.12 0.3 Vietnam 00.1 0 0.3 0 Thailand 0.07 0 4.66 0.2 The Philippines 0.01 0 3.42 0.1 Brunei 0 0 2.83 0.1 Cambodia 0.05 0 0.38 0 Laos 0 0 0.06 0 Myanmar 0 0 0.13 0 Source: China Foreign Investment Statistical Bulletin 2023, MOFCOM
In 2022, ASEAN countries established a total of 1,833 new FIEs in China, accounting for 4.8 percent of the year’s total.
The industry that attracted the most investment in 2022 was manufacturing, which took in US$4.55 billion, around 38.2 percent of total FDI inflows from ASEAN that year. This was followed by wholesale and retail, which attracted US$1.84 billion. However, wholesale and retail accounted for 26.7 percent of the total number of new ASEAN companies established in China in 2022, while leasing and business services accounted for 22.5 percent.
Top Chinese Industries for ASEAN FDI, 2022
IndustryNew companies establishedProportion (%)Actual capital investment (US$)Proportion (%) Manufacturing 135 7.4 4.5538.2Wholesale and retail 48926.71.8415.4Leasing and business services 41322.51.291.09Transport, warehousing, and postal services 482.6 0.970.82Real estate 130.70.89 0.75Source: 2023 China Foreign Investment Statistical Bulletin, MOFCOM
China-ASEAN trade and investment agreements
China-ASEAN Free Trade Area
The ASEAN-China Free Trade Area (ACFTA) was first established with the signing of the Framework Agreement on China-ASEAN Comprehensive Economic Cooperation at the sixth China-ASEAN Summit in November 2002. This initial agreement laid the foundation for closer economic and trade relations between China and ASEAN countries and was followed by the signing of the Agreement on Trade in Goods in November 2004, which took effect in July 2005. Subsequently, the Agreement on Trade in Services was signed in January 2007 and became effective in July of that year, and the Agreement on Investment was signed in August 2009.
The ACFTA has significantly impacted China-ASEAN trade, particularly with the full effect of the Protocol on Revising the China-ASEAN Comprehensive Economic Cooperation Framework Agreement in October 2019, which allowed over 90 percent of goods (approximately 7,000 types) to benefit from zero tariffs. This has greatly enhanced trade and investment liberalization and facilitation between the two parties, fostering stronger economic ties and contributing to regional economic development.
Negotiations for further amendments and upgrades to the ACFTA have been ongoing, with the ACFTA 3.0 version aiming to create a more inclusive, modern, comprehensive, and mutually beneficial FTA. These negotiations, launched at the 25th ASEAN-China Summit in 2022, have involved various working groups and the ACFTA Special Joint Committee. The third round of negotiations took place from June 24 to 27, 2023, in Kunming, China, with a focus on enhancing cooperation in emerging fields such as the digital economy, green economy, and supply chain connectivity. Both parties are committed to completing the negotiations within 2024. As of May 2024, six rounds of negotiations have been held.
RCEP
China and the 10 ASEAN countries are members of the Regional Comprehensive Economic Partnership (RCEP), the world’s largest free trade agreement (FTA). Australia, Japan, New Zealand, and the Republic of Korea are also members.
The RCEP aims to simplify and unify trade rules among member countries to reduce trade barriers and create a more seamless trading environment. The agreement covers a broad range of areas, including trade in goods and services, investment, intellectual property, e-commerce, small and medium-sized enterprises (SMEs), economic and technical cooperation, and government procurement.
One of the major commitments of the RCEP is the gradual elimination of about 92 percent of tariffs for traded goods over the 20 years following the agreement taking effect. This is particularly beneficial for export-oriented economies, such as China, Vietnam, and Singapore, as it will enable preferential market access for goods from member countries, increasing their competitiveness in regional markets.
China-Singapore Free Trade Agreement
In addition to the multilateral trade agreements, China also has a unilateral FTA with Singapore, the China-Singapore Free Trade Agreement (CSFTA). Signed on October 23, 2008, the FTA built upon the existing CAFTA by accelerating the liberalization of trade in goods and further liberalizing trade in services. The CSFTA has facilitated the elimination of tariffs on 95 percent of Singapore’s exports to China, allowed for third-party invoicing of goods, safeguarded market access, and provided a more predictable operating environment for service suppliers.
On November 12, 2018, a protocol was signed to upgrade the CSFTA, reinforcing its provisions and expanding its scope. This protocol enhanced the agreement’s effectiveness by introducing new measures and commitments to further ease trade and investment flows between China and Singapore.
A further protocol was signed in December 2023, which included commitments to services and investment openness using negative lists to create broader opportunities for investors and service providers. It also expanded cooperation in emerging fields such as the digital economy.
China-Cambodia Free Trade Agreement
The China-Cambodia Free Trade Agreement (CCFTA), signed on October 12, 2020, and effective from January 1, 2022, aims to boost trade by reducing tariffs and non-tariff barriers across multiple sectors, including trade, tourism, investment, transportation, and agriculture. China will grant duty-free status to approximately 98 percent of imports from Cambodia, while Cambodia will reciprocate with up to 90 percent of its imports from China.
Though many Cambodian exports to China were already tariff-free under the ACFTA, the CCFTA extends this benefit to over 340 additional products, such as seafood, garlic, cashew nuts, and dried chili.
The CCFTA is expected to boost bilateral trade, with two-way trade reaching US$12.26 billion in 2023, according to the Cambodia Ministry of Commerce. According to Hoe Ee Khor, chief economist of the ASEAN, it has already led to a surge in exports of Cambodian goods like vehicle parts and wood products to China, as well as increased imports of Chinese consumer goods and manufacturing materials, contributing to Cambodia’s economic diversification and growth. The agreement, alongside the RCEP, is anticipated to drive Cambodia’s economic growth, projected at 5.6 percent in 2024.
https://www.china-briefing.com/news/china-asean-trade-and-investment-relations/
World Bank Thailand Data
The Thailand Economic Monitor (TEM) reports on key developments in Thailand’s economy over the past six months, situates these changes in the context of global trends and Thailand’s longer-term economic trajectory, and updates Thailand’s economic and social welfare outlook. Each edition of the TEM also provides an in-depth examination of selected economic and policy issues and an analysis of Thailand’s medium-term development challenges. The TEM is intended for a wide audience, including policymakers, business leaders, financial-market participants, and the community of analysts and professionals engaged in Thailand’s evolving economy.
EXECUTIVE SUMMARY
Recent Developments
The economic recovery faltered due to global and domestic headwinds as growth fell to 1.5 percent year-on-year in 2024 Q1, (Figure ES 1). Goods exports and manufacturing contracted by 2.0 percent and 3.0 percent1, respectively, due to weak external demand. Internally, budget delays resulted in public investment and public consumption contracting by 27.7 and 2.1 percent, respectively. Tourism and private consumption, supported by cost-of-living measures, continued to expand. However, Thailand’s tourism arrivals showed signs of losing momentum: arrivals reached only 86 percent of pre-pandemic levels in March as the recovery in global services trade neared completion; Chinese arrivals remained significantly below pre- pandemic levels (58.2 percent). The budget delay combined with the exposure to tourism and trade caused the Thai economy’s post-pandemic recovery to lag further behind peers such as Malaysia and Philippines (Figure ES 2).
The current account remained positive at 2.2 percent of GDP in Q1 2024 but underlying weaknesses persist. Despite a goods trade surplus, goods exports contracted by 9.5 percent, in line with weak manufacturing. The financial account balance registered a deficit for the first half of this year, amid exchange rate depreciation, net FDI outflow and net foreign portfolio outflow. Meanwhile, the Real Effective Exchange Rate (REER) depreciated by 2.5 percent, one of the largest in the region. This depreciation was linked to the US dollar appreciation, uncertainty within local markets regarding new fiscal stimulus measures, and the persistent vulnerability of the current account balance.
Inflation has turned positive but remained the lowest among emerging markets due to energy subsidies and a weak recovery. After seven months in negative territory, headline inflation turned positive due to the partial withdrawal of energy subsidies and elevated food prices (Figure ES 3). In April, the government lifted the ceiling on retail diesel prices. However, subsidized electricity prices, including the reduced price for low-income households, were kept unchanged. Core inflation (excludes energy and raw food) remained weak at 0.4 percent, below its pre-pandemic average of 0.7 percent over 2016-2019, due to lower-than-expected prepared food prices and the delayed closing of the output gap. More price pressures may emerge if electricity price subsidies are further reduced and global energy prices surge. The central bank maintained its neutral policy rate but risks of underlying price pressures obscured by price controls and the potential impact of the large Digital Wallet universal cash transfer on growth and inflation complicates monetary policy.
The financial system remained stable amid improving but weak profitability, although risks associated with high levels of household debt persist. Capital and liquidity buffers at commercial banks remained well above regulatory requirements, with profitability rising. Indicators of asset quality continued to improve. Non-performing loan (NPL) ratio remained low at 2.8 percent as of Q2 2024. Profitability stood below pre-pandemic levels with return on assets at 1.2 percent and return on equity at 8.9 percent but continued to improve. Household debt stood at elevated level even compared to advanced economies (91.6 percent of GDP as of Q4 2023) and the highest among ASEAN peers. The composition of household debt in Thailand warrants attention due to the large share of uncollateralized lending (44 percent of GDP). Higher interest rates could strain households’ ability to service debt.
The fiscal stance has become less expansionary as capital spending lapsed due to the delayed budget.
The FY24 budget of THB 3.48 trillion (18.9 percent of GDP, cash basis) took effect in late April, after a seven-month delay. In the first half of FY24 (October 2023 - March 2024), the central government's fiscal deficit (GFS basis) declined to 3.5 percent of GDP, a notable decline from the 7.1 percent in the same period last year. The general government structural balance in FY23-24 showed a smaller deficit due to less expansionary policies, mirroring trends among ASEAN peers as governments prioritized fiscal consolidation in the wake of the pandemic. However, Thailand's decline was more pronounced than that of its ASEAN peers, due to delays in FY24 budget approval, which led to minimal capital spending (0.04 percent of GDP) and moderated recurrent spending.
Poverty declined in 2022 due to the labor market recovery. Per capita household consumption showed an 8.1 percent growth between 2021 and 2022 as the unemployment rate declined and average wages rose. Certain stimulus programs, such as the half-half initiative, and social assistance programs like the state welfare card and old age allowance, provided support to low-income households. With the rise in household income and consumption, the national poverty rate fell from 6.3 percent in 2021 to 5.4 percent in 2022. The decline in poverty was slightly more pronounced in urban areas compared to rural ones, decreasing from 5.2 percent to 4.2 percent in urban areas and from 7.8 percent to 7.1 percent in rural areas between 2021 and 2022.
