China's cooperation with the Association of Southeast Asian Nations (ASEAN) on setting up a free trade area is a crucial part of regional economic cooperation in East Asia.

During the Fifth ASEAN-China Summit Meeting in Brunei in November 2001, both sides reached a consensus on setting up a free trade area within the next decade. This is widely regarded as a breakthrough for East Asia's regional economic integration.

At a three-day ASEAN-China partnership forum last month, which brought together 500 government officials and business leaders, China's chief World Trade Organization (WTO) negotiator Long Yongtu highly praised plans for this free trade area.

According to Long, a framework agreement for the world's biggest free trade area, in terms of population, with an integrated market of 1.7 billion consumers will be ready for adoption at an ASEAN-China summit in Cambodia this November.

The changes in the international economic environment have urged ASEAN countries and China, all developing countries, to forge an alliance to avoid a possible new financial crisis in the future as well as to have a bigger voice in the international arena.

The birth of the euro demonstrates the furthering of European economic integration.

Following the establishment of the North America Free Trade Agreement, 34 American countries are planning to set up a free trade area in the Americas in 2005.

African countries will also form an All-Africa Single Market in 2005. These developments were the major momentums for East Asia to accelerate its pace towards regional integration to avoid being marginalized amid severe global economic competition.

Facing serious economic difficulties resulting from the 1997 financial crisis, ASEAN countries are becoming more active in promoting regional co-operation, which are expected to fend off any potential crisis.

The rapid and sustained development of China's economy, despite the global downturn, was a major factor in ASEAN's consideration of a free trade area with China.

Following the 1997 financial crisis, ASEAN has attached greater importance to seeking closer economic co-operation with its fourth largest trading partner, China, which behaved as a responsible regional power by not devaluing its currency during the crisis.

Supporting the idea for close ties with China, Malaysia's vice-minister of international trade and industry, Kerk Choo Ting said at last month's ASEAN-China partnership forum that the signing of the free trade area will allow ASEAN to make early inroads into the Chinese market through preferential import duties.

China also seeks to enhance its economic relations with ASEAN and regards its participation in East Asia's regional co-operation as of great significance for its development.

Besides being one of China's most important source for foreign direct investment, ASEAN has been one of China's key trading partners in the past 20 years. It is currently China's fifth largest trade partner.

According to statistics from China's Ministry of Foreign Trade and Economic Co-operation, bilateral trade between China and ASEAN has maintained an average annual growth rate of 15 per cent since 1995. Trade in the first half of this year reached US$23.55 billion, representing an increase of 18.7 per cent over the same period last year.

The establishment of a fixed economic co-operation mechanism like a free trade area will lay a solid foundation for the growth of both sides.

Under the WTO, a country's influence over the rules in the world economy is decided by its economic strength, in particular the market that it could offer other countries. The establishment of a China-ASEAN Free Trade Area could form a matching market scale with the European Union or an America free trade area.

This would provide China with a new platform to participate in stipulating world economic rules, which would also create a favourable condition for its economic development.

Economic integration between China and ASEAN through their free trade area plan would also be conducive to the full convertibility of China's currency.

Since the co-operation between East Asia was started largely due to the 1997 financial crisis, currency co-operation is a priority.

It is an inevitable trend for a RMB capital account to be opened. A relatively stable currency system as a result of regional economic co-operation would reduce risk.

Participating in regional economic co-operation is expected to help eliminate or alleviate territorial, ethnic or historical disputes between member states.

Regional co-operation could also enhance the mutual trust and increase the influence of member states in world affairs.

This, of course, contributes to building a favourable external environment needed for China's modernization.

Economic interests are the key in the proposal for a China-ASEAN free trade plan.

Closer economic co-operation between the two major economies in Asia will undoubtedly contribute to the deepening of regional economic integration and bring common prosperity to the region.

(China Daily September 10, 2002)