The China-ASEAN free trade area: Establishment, opportunities and challenges

China’s recent proposal to the Association of Southeast Asian Nations (ASEAN) for establishing a free trade area (FTA) between them has marked an important milestone in the development of China-ASEAN relations. The concept of the China-ASEAN Free Trade Area (CAFTA) is a natural response to a number of important global and regional developments during the course of the past decade. This proposal has created strong academic interest and generated heated debate. In terms of the structure of this free trade area, various schemes and approaches have been proposed, however most scholars suggest that the CAFTA should follow the framework of the already established ASEAN Free Trade Area (ASEAN-FTA). With the establishment of the free trade zone, trade and investment between the Chinese and ASEAN economies is expected to increase significantly. While the literature suggests that the potential economic benefits are enormous, at the present stage of development China and ASEAN are more competitive than complementary given the similarity in their trade and industrial structures. ASEAN and China are also direct competitors for foreign investment, rather than significant investors in each other’s economies. Despite these challenges, the prospect for flourishing intra-regional trade is bright, especially if China and the ASEAN nations can develop their economies through deeper integration in the long term. CAFTA is a good start in terms of facilitating this economic integration. However, it faces a hard road ahead in terms of the substantial difficulties and complications in implementing CAFTA. If the CAFTA is successfully established, China and ASEAN nations will enjoy huge opportunities as the world’s most populous free trade area