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Launch of ASEAN China FTA to propel Yunnan's rise

By in Features on

Last Friday while much of the world was nursing the hangover of a decade of war and terrorism, economic turmoil and environmental degradation, China and its Southeast Asian neighbors took a big step toward regional integration with the launch of a new free trade area (FTA). The long term implications for Yunnan are massive.

China and the Association of Southeast Asian Nations (ASEAN) have now entered the first phase of an FTA, eliminating tariffs on around 7,000 items including fruits, vegetables, textiles and machinery. These goods represent roughly 90 percent of trade in the new economic bloc, which is the world's largest in terms of population and third-largest after the EU and NAFTA in terms of GDP.

The first phase includes China and the more developed ASEAN members: Brunei, Malaysia, Indonesia, the Philippines, Singapore and Thailand. On Friday these countries also launched the first phase of an FTA within ASEAN itself. The remaining members – Cambodia, Laos, Myanmar and Vietnam – will join the ASEAN China FTA in 2015.

Although it does not directly border any of the first phase countries, Yunnan has much to gain from the FTA's launch. It has water, air and highway connections to Thailand plus air links to Malaysia and Singapore, all of which are expected to become even busier trade routes. The launch of the FTA has long been viewed as a major milepost in the rise of Yunnan as China's gateway to Southeast Asia.

As some observers note, the FTA is more than just a step toward trade integration, it is also a major strategic achievement for China, whose political power in Southeast Asia already greatly surpasses that of regional rival India and is also seriously challenging American influence in the region.

China's soft power in Southeast Asia will undoubtedly grow in step with trade within the FTA, and much of this influence will be projected from Yunnan.

In the coming decade, China and Southeast Asia will become increasingly connected by a vast network of highways and rail which will provide cities in Yunnan with cheap overland access to markets in Myanmar, Laos, Vietnam, Cambodia, Thailand, Malaysia and Singapore. Seated at the northern end of this transport web, Yunnan is poised to become an increasingly important international trade hub.

The initiation of the ASEAN China FTA is a modern revival of the ancient tea and horse caravan routes from centuries ago known as the South Silk Road, which linked China with Southeast Asian markets as well as Tibet and India.

Total trade between China and Southeast Asia was US$100 billion in 2004 and US$231 billion in 2008, but this is just the beginning. Bilateral trade – much of which will be passing through Yunnan – is expected to double over the next decade.

Difficult as it may be to imagine, Yunnan's days as an economic and political backwater are officially over.

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Comments

One caveat to the optimism- Yunnan agriculture may face increased competition for certain goods from farmers in countries such as Vietnam, Laos, and Cambodia.

For further analysis check out this: www.chinaintelligenceonline.com/[...]

/shameless plug :)

"Yunnan agriculture may face increased competition for certain goods from farmers in countries such as Vietnam, Laos, and Cambodia."

if it's a caveat, you're assuming that competition in the marketplace is a de facto bad thing?

Hedgepig,

Not at all. My point is merely that with increased competition Yunnan may see a relative drop in demand for some of its agricultural products as imports from Southeast Asian countries rise. This is likely to lead to decreased revenue for Yunnan farmers, who still comprise a significant bulk of the provincial population.

My larger point is that free trade agreements as such create winners and losers and aren't uniformly positive developments.

i see more of a chance for yunnan and especially kunming to become a trade and transport hub competing with the coastal harbors for trade with southeast asian countries. so a better infrastructure wil be required.
for the farmers: we don't know which farmers can produce what at what price, but calmatt is right to say that competition is only good if you actually are competitive.

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