RCEP and China-ASEAN Free Trade Area: Unleashing full potential of regional economic integration

Editor's note: Yuan Bo is a director and researcher at the Institute of Asian Studies, Chinese Academy of International Trade and Economic Cooperation under the Chinese Ministry of Commerce. The article reflects the author's opinions and not necessarily the views of CGTN. It has been translated from Chinese and edited for brevity and clarity.

In recent years, China and Association of Southeast Asian Nations (ASEAN) countries have strengthened free trade cooperation, effectively implementing the Regional Comprehensive Economic Partnership (RCEP) and the China-ASEAN free trade agreements (FTAs). Their economic and trade ties have delivered impressive results. Bilateral merchandise trade has reached record highs, showcasing strong resilience. Service trade is rebounding rapidly with significant potential. Bilateral investment is growing stronger, becoming a key driver of regional economic expansion. 

Today, the global economy faces heightened uncertainty, fueled by rising geopolitical tensions and increasing protectionist and unilateral trade policies. Against this backdrop, China and ASEAN countries have an even greater reason to harness the benefits of trade agreements like the RCEP and the China-ASEAN FTA. By working together to build a high-level platform for regional cooperation, they can provide enterprises with a stable and predictable environment and unlock the full potential of the region's economic partnership.

1. RCEP and China-ASEAN Free Trade Area make notable strides

Since its full implementation three years ago, the RCEP has seen continuous improvements in its cooperative mechanisms. During this time, China and other ASEAN-led member states have worked closely together, establishing four subsidiary bodies under the RCEP Joint Committee – the goods committee, the services and investment committee, the sustainable growth committee, and the business environment committee – while also finalizing procedures for the accession of new members.

China and ASEAN have substantially concluded negotiations on the upgraded 3.0 version of the free trade area. First established in 2002 as each side's earliest externally negotiated FTA, the China-ASEAN Free Trade Area has served as a model and leader in advancing bilateral economic cooperation and regional economic integration. 

After conducting a joint feasibility study, China and ASEAN officially launched negotiations for the Version 3.0 China-ASEAN Free Trade Area in 2022 and substantially concluded them in 2024. The continuous upgrading from Version 1.0 to 2.0 and now 3.0 reflects the growing scope and depth of China-ASEAN economic cooperation, as well as the shared determination of China and ASEAN countries to respond to external challenges and firmly advance open and collaborative development.

RCEP and the China-ASEAN FTA are driving regional policy connectivity. Since its implementation, RCEP has reinforced the existing China-ASEAN FTA by combining tariff reductions and applying higher-standard customs procedures. This has significantly improved the liberalization and efficiency of goods trade. 

Meanwhile, under the RCEP framework, China and ASEAN countries have adopted a negative list approach to investment liberalization and actively implemented high-standard behind-the-border rules on intellectual property, e-commerce, government procurement and competition. These efforts have effectively promoted regulatory alignment and market integration across the region. 

Version 3.0 of the China-ASEAN FTA builds on the existing agreements and RCEP, delivering key added value. It marks breakthroughs in emerging areas such as the digital and green economies, while also upgrading rules in traditional sectors. Looking ahead, this progress is expected to further advance mutual recognition of standards and regulatory harmonization in the region.

2. China-ASEAN economic and trade cooperation achieves remarkable results under free trade framework

Merchandise trade grows steadily, delivering mutual benefits. China has remained ASEAN's largest trading partner for 16 consecutive years, while ASEAN has held the same position for China for five years running. In 2024, bilateral goods trade between China and ASEAN hit a new record of nearly 7 trillion yuan ($971.6 billion), rising 9 percent year on year – 4 percentage points higher than the overall growth rate of China's foreign trade. 

Service trade recovers rapidly, boosting people-to-people connectivity. The steady growth of bilateral goods trade between China and ASEAN has driven the expansion of logistics, finance, insurance, and various producer services, creating a virtuous cycle of mutual benefit. As service trade liberalization under the RCEP and China-ASEAN FTA continues to deepen, and with more ASEAN countries advancing visa exemptions and payment facilitation measures, exchanges between the two sides have become increasingly frequent. 

Closer investment cooperation is fostering mutual benefits and win-win outcomes. The deepening implementation of the RCEP and the China-ASEAN FTA has improved the regional business environment, offering companies greater convenience in operations and further unlocking the potential for bilateral investment cooperation. 

In the first seven months of 2024, China's direct investment across all sectors in ASEAN amounted to $12.96 billion, rising 15.3 percent year on year. Over the same period, ASEAN investment in China remained strong, reaching $7.3 billion, a 14.1 percent increase. As of the end of July 2024, cumulative two-way investment between China and ASEAN exceeded $400 billion. 

Strengthened investment cooperation has not only created numerous jobs and supported stable socio-economic development on both sides, but also contributed positively to regional and global economic recovery.

Digital and green economy cooperation expands mutual benefits. Under the RCEP framework, China and ASEAN have reached a consensus on e-commerce rules, creating a favorable environment for deeper digital economic cooperation. In recent years, cross-border e-commerce and other emerging trade formats between China and ASEAN countries have grown rapidly. 

Chinese companies are actively participating in the digital infrastructure development of ASEAN countries and collaborating with local companies on the industrial application of digital technologies, continuously expanding mutually beneficial partnerships. 

As China and ASEAN countries accelerate their green transitions, the green economy has become a key component of the upgraded Version 3.0 China-ASEAN FTA. Cooperation in areas such as new energy vehicles, lithium batteries and photovoltaics is emerging as a new engine for growth.

3. Deepening high-level free trade cooperation to tap into greater regional openness dividends

Efforts will be made to build a higher-level regional cooperation platform through expansion and upgrading. China will work closely with ASEAN to advance the RCEP cooperation framework and related structures, fully leveraging the roles of the four subsidiary bodies under the RCEP Joint Committee, as well as the newly established RCEP Support Unit. 

On the basis of accelerating the signing of the Version 3.0 China-ASEAN FTA, both parties will further promote the upgrading of RCEP, aiming to reduce tariffs and non-tariff barriers, streamline customs procedures, improve rules of origin, liberalize market access for services and investment, enhance rules on e-commerce and intellectual property and explore new areas such as green economy cooperation. 

Following the accession procedures set out in RCEP, China welcomes interested economies to apply for membership, with the shared goal of building RCEP into a high-standard platform for regional openness and cooperation in the Asia-Pacific. Measures will be taken to enhance implementation coordination to maximize the combined benefits of FTAs. 

China will work with ASEAN to fully and effectively implement the RCEP, promoting information exchange and capacity-building initiatives. Both parties will strengthen the sharing of business experiences and best practices, particularly in utilizing cumulative rules of origin and trade facilitation measures. This will help companies—especially SMEs—better integrate RCEP provisions into their import and export processes, improve the overall utilization of the agreement, reduce trade costs, expand regional market access, and better respond to external challenges. 

Steps will be taken to focus on quality productive forces to create new regional growth drivers. China will seize the opportunity presented by the rapid development of the digital economy, green economy, and emerging industries. 

By leveraging RCEP's market access commitments and high-standard trade rules on intellectual property and e-commerce, China aims to deepen cooperation with ASEAN on "new quality productive forces." This includes expanding practical applications, innovating business models and actively fostering emerging and future industries through an open and collaborative innovation network. Such efforts will enhance the region's industrial competitiveness and jointly create new economic growth engines. 

China and ASEAN will also explore further liberalization of digital trade and trade in green products, promoting mutual recognition of standards in areas such as the digital and green economies. Strengthening infrastructure related to these sectors, along with innovations in digital and green financial products and services, will accelerate the digitalization and green transition of regional industries, thus ensuring broader access to shared development benefits.