China to Expand Free Trade Agreement with Southeast Asia

China will expand its free trade agreement with ASEAN, prioritizing digital technology and renewable energy to boost business transactions and investment. By expanding the Asian trade bloc, China aims to counter the Trump administration’s tariff-based measures.

The China-ASEAN Free Trade Agreement, which came into effect in 2005, has reduced tariffs on trade between the two countries. ASEAN member states include ten countries, including Thailand, Indonesia, Malaysia, the Philippines, and Singapore.

This expansion of the FTA prioritizes nine areas, including digital technology, renewable energy, and streamlined customs procedures. Regarding digital technology, China will promote the digitization of settlement and documentation required for trade, striving to achieve system interoperability. The necessary infrastructure and information management rules will also be improved.

China’s independently developed Cross-Border Interbank Payment System (CIPS) is likely to be promoted. China is rapidly expanding CIPS in Asia to expand RMB settlement methods and networks.

It is expected that Chinese tourists and business people will be able to use WeChat Pay and Alipay abroad. The use of settlement methods used by ASEAN countries in China will also expand.

Regarding renewable energy, trade in new energy vehicles, including pure electric vehicles (EVs), and photovoltaic power generation will be accelerated, increasing investment in related industries. Regarding customs procedures, a mechanism will be introduced that allows for the completion of all required trade applications through a single window.

A Chinese Ministry of Commerce official revealed at a press conference on September 8th that negotiations with relevant countries have been completed. He also stated that China will maintain close communication with ASEAN and actively promote domestic ratification procedures in each country, and expressed the goal of signing a protocol to amend the Free Trade Agreement within this year.

This issue is likely to be a major topic at the ASEAN summit in Malaysia in October.

China intends to strengthen trade relations with ASEAN to counter the US’s use of tariffs to exert pressure. Regarding the US, a Chinese Ministry of Commerce official emphasized, “Faced with the impact of unilateralism and protectionism on global supply chains, China and ASEAN adhere to multilateral cooperation to jointly maintain the stability and smooth operation of regional supply chains.”

The US began imposing additional tariffs totaling 145% on China in April. After both sides reduced tariffs by 115% in May, the US still applies an additional 30% tariff to China. Since April, China’s exports to the US have declined year-on-year for five consecutive months.

For China, ASEAN has become its largest export destination.

Data from the General Administration of Customs of China shows that by August 2025, China’s imports and exports to ASEAN will account for 17% of its total imports and exports, remaining above the level for the entire year of 2024. Amid slowing domestic demand and shrinking exports to the US, Southeast Asia has become a very important new export destination.

To circumvent US tariffs on China, China has increased its “roundabout exports” through third countries.

Going forward, the practice of shipping parts to ASEAN for assembly and then exporting them to the US and other regions is likely to continue.

For ASEAN, strengthening relations with China, its largest non-regional trading partner, is also essential. In August, the US implemented a 40% reciprocal tariff on Myanmar and Laos, and a 20% reciprocal tariff on Vietnam. For countries seeking to increase exports to China as an alternative to the US market, China’s expansion of free trade agreements will benefit them.