China’s Trade Corridors Spur Huge Trade Growth in Asia

An article posted on April 20 by the Indonesia-based Establishment Post shows that the use of Double Tax and Free Trade Agreements over the last five years has enhanced trade growth significantly in the ASEAN and India, in South Asia. The main driver to this trade-growth phenomenon is China, with its huge economy and its growing potential for reaching out to its middle-class consumer base, itself scheduled to reach 600 million people by 2020.

The article pointed out that China-ASEAN trade now runs both ways. Where China was once solely an export competitor, it is now fast turning into one of ASEAN’s most important consumer markets. ASEAN states, themselves, are playing an increasingly larger role as export destinations for China as well. In addition, countries such as Indonesia, the Philippines, Malaysia, Thailand, and Vietnam, with their large labor pools, have become attractive production locations for Chinese companies. The article says the same is true of India, which is going through its own demographic changes, and of all Asian nations, only India has the workforce size to be able to get anywhere near matching Chinese levels.

In the immediate future, China’s free trade corridors are expected to continue to grow. The projection made by the Establishment Post suggests that the overall bilateral trade of China with ASEAN is expected to reach $1 trillion by 2020, and points to India, where bilateral trade is expected to rocket to $250 billion in the same period, and Vietnam, whose trade may rise to some $150 billion during this time frame.

An important factor behind this growth spurt is the various free trade and double tax treaty benefits that China has signed with these nations. Foreign investors based in any of these countries can access these agreements, which can not only reduce import-export tariffs, but also offer tax-reduction mechanisms to international businesses by outlining areas in which employees sent to work for a period in these nations are not taxed, as well as to provide mechanisms for reducing income tax liabilities, the article noted.

China Is Heading Towards a Crucial Development Stage, Says Diplomat Zhu Qiwen

Former Chinese Ambassador to Viet Nam Zhu Qiwen, in an article with the China Daily published today, pointed out that, unlike the so-called “new normal” of jobless recovery in many Western countries after the 2008 global financial crisis, Chinese policymakers have adopted the phrase to define a crucial development stage toward the fulfillment of the country’s two centennial goals: Building a moderately well-off society by 2021 and becoming a fully developed nation by 2049.

Zhu pointed out that China’s success in transforming its growth pattern in the new normal era will benefit itself and the world.

“For instance, it has been estimated that China’s imports will reach $10 trillion in the next five years, while its investments in other economies will exceed $500 billion. So the need to realize the growth potential of the Chinese economy is obvious. The tools Chinese policymakers can use to ensure slower but sustainable growth are abundant, including sizable fiscal headroom, and healthy external payments and liquidity buffers.”

At the same time, he cited President Xi Jinping’s speech at last month’s annual Boao Forum for Asia, where he said China’s economy shouldn’t be viewed by only its growth rate.

“China’s economy entering the new normal will continue to provide countries, including Asian nations, [with] more market growth, investment and co-operation opportunities.”

Zhu said the slowing down of China’s growth rate should not be a subject of alarm for anyone.

“If fast but extensive growth has been the trademark of China’s economic progress after the late 1970s, slower but sustainable development will define the unfolding age of the new normal, which Chinese policymakers have deemed as a must to deliver their promise of breaking through the so-called middle-income trap and realizing high standards of living for most people.”