In 2010, as the New Year bell rang, it marked not just a celebration of the past, but also a new era of economic opportunities for China and ASEAN. Chinese consumers would soon enjoy more affordable goods from neighboring countries, such as Vietnamese fruits, Indonesian coffee, and Philippine coconut sugar. For businesses, investing in the six ASEAN nations became more straightforward and beneficial. At a press conference held just days before, Zhang Kening, the Commercial Counselor of the Ministry of Commerce’s International Department, announced that the China-ASEAN Free Trade Area (CAFTA) would be fully established on January 1, 2010. This would make it the world's third-largest free trade zone, following the EU and NAFTA. Within this region, over 90% of products traded between China and six ASEAN members—Brunei, the Philippines, Indonesia, Malaysia, Thailand, and Singapore—would be tariff-free. China’s average tariff on ASEAN goods would drop from 9.8% to 0.1%, while ASEAN’s average tariff on Chinese products would fall from 12.8% to 0.6%. The four newer ASEAN members—Vietnam, Laos, Cambodia, and Myanmar—were expected to reach the same 90% zero-tariff target by 2015. Zhang emphasized that CAFTA was one of the most significant free trade agreements China had negotiated, creating a large economic partnership with developing countries. The region covered 1.9 billion people, with a combined GDP of nearly $6 trillion and an annual trade volume of $4.5 trillion. The growth of bilateral trade between China and ASEAN had been remarkable, rising from $78.2 billion in 2003 to $231.1 billion in 2008—a 24.2% annual increase. As a result, ASEAN moved from being China’s sixth-largest trading partner to its third, while China rose from fifth to fourth in ASEAN’s trade rankings. With trade expanding rapidly, mutual investment between China and ASEAN also surged. ASEAN’s direct investment into China increased from $2.93 billion in 2003 to $5.46 billion in 2008, while China’s investments in ASEAN grew from $230 million to $2.18 billion during the same period—an almost ninefold increase. More Chinese companies were choosing ASEAN as their main destination for overseas investment. Even during the global financial crisis, trade between China and ASEAN declined less sharply than China’s trade with other regions. For Hunan-based enterprises, the benefits of the free trade zone were clear. Wang from Chenzhou Grain and Oil Machinery Co., Ltd. noted that the elimination of tariffs on over 7,000 products would significantly boost the competitiveness of their grain and oil machinery in ASEAN markets. “Currently, tariffs in Indonesia can be as high as 20% to 30%. With zero tariffs, we will have a much better cost advantage when competing against Japanese products,” he said. Yinzhou Grain and Oil Machinery Co., Ltd., a leading manufacturer in rice processing and grain storage equipment, has exported its products to several ASEAN countries for over 40 years. Their experience shows how the free trade area is opening up new opportunities for Chinese manufacturers. According to officials from the World Trade Organization Office in Hunan, most ASEAN countries are developing economies with rich natural resources but underdeveloped manufacturing sectors. These nations are ideal for Chinese companies implementing their “going out” strategy. At the recent 6th China-ASEAN Expo, customers from Vietnam, Myanmar, Indonesia, Thailand, and Cambodia showed strong interest in Hunan’s agricultural and grain processing machinery. Lingling Hengyuan Power Equipment Co., Ltd. recently opened an office in Vietnam to manage its overseas marketing of hydroelectric generating units. The company’s representative said, “The establishment of the free trade zone will create a more open, stable, and optimized environment for our business.”

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