China first proposed the idea of a free trade area in November 2000. Leaders of ASEAN and China thus decided to explore measures aimed at economic integration within the region. In Brunei the following year, they endorsed the establishment of an ASEAN–China Free Trade Area.
The framework agreement was signed on 4 November 2002 in Phnom Penh, Cambodia, by eleven heads of government as follows.
Hassanal Bolkiah (Sultan of Brunei Darussalam), Hun Sen (Prime Minister of Cambodia), Megawati Soekarnoputri (President of Indonesia), Bounnhang Vorachith (Prime Minister of Laos), Mahathir Mohamad (Prime Minister of Malaysia), Than Shwe (Prime Minister of Burma), Gloria Macapagal Arroyo (President of the Philippines), Goh Chok Tong (Prime Minister of Singapore), Thaksin Shinawatra (Prime Minister of Thailand), Phan Văn Khải (Prime Minister of Vietnam), Zhu Rongji (Premier of the State Council of the People's Republic of China).
The first stage implied the 6 first signatories who engaged in the elimination of their tariffs on 90% of their products by 2010. Between 2003 and 2008, trade with ASEAN grew from US$59.6 billion to US$192.5 billion. China's transformation into a major economic power in the 21st century has led to an increase of foreign investments in the bamboo network, a network of overseas Chinese businesses operating in the markets of Southeast Asia that share common family and cultural ties. ASEAN members and the People's Republic of China had a combined nominal gross domestic product of approximately US$6 trillion in 2008.
In November 2022, China and ASEAN jointly announced the official start of the China-ASEAN FTA 3.0 negotiations. This agreement will encompass the following areas: trade in goods, investment, digital economy, and green economy. The initial round of consultations regarding the China-ASEAN FTA 3.0 negotiations was initiated on February 7, 2023. The Substantial conclusion of the China-ASEAN FTA 3.0 negotiations is proclaimed in Vientiane, Laos, on October 10, 2024.
ASEAN-China Free Trade Area (ACFTA) is one of the largest FTAs in the world, covering one-fourth of the world population, and the building of the 3.0 version of ACFTA actively echoes the development needs of both sides and is line with the trend of global economic development. It aims to eliminate tariffs and reduce non-tariff barriers to trade in goods and services, as well as to promote investment between the two parties. The ACFTA is significant as it was ASEAN's first FTA with an external dialogue partner and China's first FTA.
Tariff Elimination: The ACFTA aims to eliminate tariffs on a large percentage of traded goods, with the goal of facilitating trade between ASEAN and China.
Trade in Services: The agreement includes provisions for trade in services, aiming to create a more predictable and open environment for service providers.
Investment: The ACFTA also includes provisions to protect and promote investment, creating a more transparent and secure environment for investors.
Upgrade: The ACFTA has undergone an upgrade, with new and enhanced regulations in areas like supply chain connectivity, competition, and consumer protection, according to a report on Channel News Asia.
Significance: The ACFTA is a cornerstone of the economic relationship between ASEAN and China. The agreement is seen as contributing to the economic development of both ASEAN and China, as well as the wider Asia-Pacific region. The ACFTA is expected to lead to increased trade and investment flows between ASEAN and China. The upgrade to the ACFTA includes a focus on strengthening supply chain resilience, which is particularly important in the current economic climate, according to a report on Channel News Asia. The ACFTA represents a significant step in deepening economic integration between ASEAN and China, with benefits for both sides and the broader region.