Unfounded Concerns About China's Trade with ASEAN
The ongoing strategic competition and trade tensions between China and the United States have significantly impacted the global economy and industrial landscape. However, a recent trade agreement between the two powers has sparked concerns in Southeast Asia, particularly regarding the potential increase in Chinese goods entering the market without US tariffs. Yet, a closer examination of China-ASEAN supply chains and China's economic restructuring reveals that these fears are unfounded.
China and ASEAN have a long-standing, mutually beneficial partnership, with deeply intertwined interests and shared economic prospects. China has been ASEAN's largest trading partner for 16 consecutive years, while ASEAN has held that position for the past five years. This partnership has fostered significant trade growth and diversification.
As cooperation deepens, the industries and supply chains of both nations have become highly complementary and integrated. This interdependence is evident in sectors like semiconductors, flat-panel display modules, lithium batteries, auto parts, and computer components. By importing critical parts and technology-intensive intermediates from China, ASEAN economies are upgrading their industries and moving up the value chain, thereby strengthening the region's supply-chain ecosystem and paving the way for higher-level cooperation.
China's emerging industries are also transitioning from simply exporting products to co-building ecosystems, creating robust cross-border production and supply systems that support Southeast Asia's transformation and upgrading. This shift has broader implications, with positive economic outlooks.
In 2024, China's per capita GDP surpassed $13,000, and total retail sales continued to rise, solidifying its position as the world's second-largest consumer market. As urbanization and income growth continue, the middle-income group is projected to expand from approximately 400 million to about 700 million by 2035, forming a vast consumer base with immense potential.
For the Chinese economy, this substantial domestic market serves as a buffer against global volatility and a cornerstone of sustainable growth. Amid geopolitical tensions, rising protectionism, and uncertain external demand, robust domestic consumption provides strategic depth. Companies can iterate products, upgrade technology, and build brands domestically. The growth in consumption helps to absorb excess capacity, stabilize employment and income expectations, and reduce overreliance on overseas markets.
The 15th Five-Year Plan (2026-30) will further emphasize expanding domestic demand. Policies aimed at improving income distribution, strengthening social security, and optimizing the consumption structure will continue to unlock demand and enhance consumption capacity, making the domestic market even larger and more robust. This will not only boost China's growth momentum and resilience but also create a steady spillover demand for regional partners, including ASEAN. China's role will be that of a 'stabilizer,' not a 'shock source.'
ASEAN is a priority in China's neighborhood diplomacy and a key region for high-quality Belt and Road cooperation. The China-ASEAN Free Trade Area is celebrating its 15th anniversary, and version 3.0 was launched this year. In the face of a changing global trade landscape, China has chosen to deepen win-win cooperation with ASEAN due to their shared long-standing industrial complementarities, strong chain synergies, and common development needs. Cooperation is expanding beyond traditional trade, delving into deep co-development in the digital economy, green growth, new-energy vehicles, and other emerging fields. By leveraging the Regional Comprehensive Economic Partnership, both sides can further reduce barriers and enhance regional supply-chain integration and efficiency.
Looking ahead, China will continue to pursue comprehensive strategic cooperation with ASEAN, focusing on building new industries together, exploring new markets, and co-creating a more resilient and innovative regional economy. This approach helps to offset global uncertainty and fosters a more autonomous and stable regional industrial ecosystem. It also aligns with the broader trend of economic globalization and the vision of a community with a shared future for humanity.
Peng Bo, a researcher at the Chinese Academy of International Trade and Economic Cooperation, Ministry of Commerce, and Wang Dongman, a research associate at the same institution, contributed to this article.
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