China should actively participate in the process of regional economic integration to meet the challenges of globalization, to sustain trade and economic growth, as well as to promote the regional and world economies.

 

It is strategically important for China to join regional integration rather than develop in an isolated environment, following its entry into the World Trade Organization.

 

With the tide of globalization accelerated, the world's major economies are revving up efforts to form regional integrations to maximize the advantage of the tide as well as avoid its negative impact.

 

China should also attach greater importance to constructing and participating in regional economic blocs.

 

Strengthening regional integration also echoes China's efforts to push its enterprises to go global.

 

The process of regional integration usually begins from trade liberalization and then reaches to the opening-up of investment.

 

If China participates in this process, its enterprises will find more opportunities and face less risks when they invest in neighboring countries and regions.

 

At the beginning of this century China has quickened its pace of regional integration.

 

It has entered into a few regional cooperative arrangements featuring free-trade elements.

 

In May 2001, China became a member of the Bangkok Agreement, the first free trade area (FTA)-analogue the country joined.

 

The spirit of the agreement is to offer preferential tariffs and dismantle non-tariff barriers among Asian-Pacific members.

 

China implemented the tariff reduction in line with the agreement beginning in 2002.

 

The move boosted trade between China, Bangladesh, South Korea, Laos and Sri Lanka.

 

The Chinese mainland signed free-trade pacts Closer Economic Partnership Arrangement (CEPA) with Hong Kong and Macao in June and October of last year, respectively.

 

The CEPA came into effect beginning this year.

 

The arrangements include trade of goods, services and investment facilitation, and were the first free trade agreements the Chinese mainland officially participated in.

 

China and the Association of Southeast Asian Nations (ASEAN) drafted a framework to build the FTA by 2010.

 

Free trade arrangements have already been carried out on some items since October 2003.

 

Last month the two sides signed an agreement on trade of goods, and will implement tariff reduction starting in 2005, marking the official launch of the FTA.

 

The China-ASEAN FTA will promote trade and investment in the region. Consumers will also benefit from price drops on imports from other member nations.

 

Aside from neighboring nations, China is also active in talks with close trading partners across the globe in the establishment of FTAs.

 

New Zealand, Chile, Australia and the Gulf Cooperative Council (GCC) have announced the launching of FTA negotiations with China.

 

Currently, China is still at a beginning stage in terms of development of regional economic integration.

 

All the regional preferential economic arrangements that the Chinese mainland has officially entered the Bangkok Agreement, CEPAs and the China-ASEAN early-harvest program are based on trade, the preliminary phase of regional integration.

 

All these arrangements were signed or implemented in recent years.

 

Such free trade arrangements are still undeveloped compared with economic blocs such as the European Union and the North America Free Trade Area.

 

However, initial success has paved the way for deeper and wider cooperation in the future.

 

China also talked with these regional trading partners about the liberalization of investment and services.

 

The pace of China's involvement in regional integration is by no means slow.

 

For example, China and ASEAN only spent three years on negotiations and preparations before they launched the early-harvest program.

 

The two sides discussed the feasibility of the establishment of an FTA in 2000. In 2001, they vowed to spend 10 years in completing the FTA construction. A year later, they signed a framework agreement over the establishment of the FTA.

 

They began the construction of the FTA this year by reducing and eliminating tariffs on fruits and vegetables.

 

In addition, the FTAs in which China participates feature high degrees of flexibility.

 

Exceptions exist in agreements, as nations greatly differ in development level and culture.

 

For example, the Philippines did not participate in the early-harvest program for fear of hurting its agricultural sector.

 

It is necessary to adopt such a flexible attitude when China is promoting regional integration.

 

In the future, China should stick to the principles of "being from easy to difficult," and strive to first form FTAs with neighboring countries and regions.

 

In the short term, China should fast-track the construction of a China-ASEAN FTA to maximize the complementarities between the two.

 

It should also push for the Bangkok Agreement to increase in influence.

 

In addition, China should pursue the establishment of a Central Asian FTA. This has become the ultimate goal of the Shanghai Co-operation Organization (SCO) that consists of China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan.

 

Currently, economic relations between China and other SCO members are still about trade facilitation.

 

In the medium term, China should strive for the establishment of a China-Japan-South Korea FTA.

 

China proposes to launch an FTA feasibility study when the time is ripe.

 

Meanwhile, an FTA that groups China, Japan, South Korea and the 10-member ASEAN (10+3) group of countries should be another goal China strives for.

 

In the long run, an FTA that covers the whole of Asia is the ultimate goal of this regional integration progress.

 

(China Daily December 7, 2004)