Malaysia key to unlocking Asean-China trade potential, say experts

 They say Malaysia can leverage its special relationship with China to secure meaningful regional outcomes, especially in the digital economy and use of AI.

Asean and China recently updated their free trade agreement to include new rules for emerging sectors, including the digital and green economies.

PETALING JAYA:

 Malaysia’s special relationship with China presents a unique opportunity to drive better regional economic outcomes, particularly as it leads Asean during a period of global economic uncertainty, analysts say.

A recently updated Asean-China free trade agreement (ACFTA) now includes new rules for emerging sectors, including the digital and green economies.

Denis Hew.

“It makes a lot of sense for us to upgrade the ACFTA to also cover the digital economy,” said Denis Hew, senior research fellow at the Lee Kuan Yew School of Public Policy.

He said that beyond trade, the updated deal would allow for collaboration in digital skills training, science and tech partnerships, and broader innovation ecosystems that support small and medium enterprises in the region.

“China is a leader in emerging technologies. A perfect example is DeepSeek, where China has proved that you don’t have to spend billions of dollars in investments for artificial intelligence. You see a lot of innovation happening in China,” said Hew.

Tricia Yeoh.

University of Nottingham Malaysia’s Tricia Yeoh agreed, adding that China could also work with Asean to develop shared AI governance frameworks and regional programmes that mirror Europe’s Erasmus+ programme, facilitating the exchange of digital talent between Asean and China.

But Yeoh also told FMT more can be done, as China’s investment into strengthening Asean’s socio-economic architecture would benefit the republic as well.

“Malaysia, as Asean chair, should optimise this by negotiating a stronger, firmer deal that would benefit the entire bloc,” she said, adding that this includes co-financing renewable energy infrastructure and sustainable agriculture, as well as more resilient Asean supply chains.

But she also warned that Asean must be prepared to assert itself, especially on sensitive issues like the South China Sea.

“China needs to support Asean centrality when it comes to dealing with the territorial waters issue, since its current actions are undermining trust throughout the region.

“Asean needs to be willing to put this on the table, and secure China’s agreement so that both parties can arrive at a good deal,” she said.

Yeoh proposed deeper maritime cooperation—including joint early-warning security systems and marine science research—as part of the broader trust-building process.

Boosting economic resilience

The ACFTA upgrade is one of the major deliverables under Malaysia’s chairmanship, alongside the Asean Digital Economy Framework Agreement, set to be finalised later this year.

Both Hew and Yeoh stressed that the updated ACFTA fits well into Asean’s broader trade strategy, particularly as global trade governance falters.

“Many of the Asean+1 FTAs, including the one with China, were signed over a decade ago. Upgrading them, especially the ACFTA, helps expand regional supply chains and future-proofs Asean’s economic integration,” said Hew.

Like many other countries, Asean is increasingly turning to regional and bilateral agreements to protect its economic interests.

“We have agency here. We can strengthen our economic resilience through economic cooperation and integration. With the World Trade Organization currently quite dysfunctional, this is the only way to go in terms of facilitating greater trade and investment,” said Hew.

The WTO oversees the global multilateral trading system, but its relevance has been questioned due to stalled trade negotiations and US criticism of its dispute settlement mechanism.

Emphasising the importance of closer bilateral and regional cooperation, Yeoh said Asean must continue fostering deep ties and relations with other major international blocs such as the European Union, Latin America and Africa.

“These global ties will contribute to greater resilience when and if conflict grows, and there is even deeper economic uncertainty. The benefits are not just in terms of economics and trade, but also security and cultural aspects,” she said.

Kuala Lumpur is set to host the upcoming Asean Summit on May 26 and 27.

With US-China rivalry intensifying and global trade governance weakening, Asean leaders are expected to focus on strengthening strategic autonomy and economic resilience. - FMT