KUALA LUMPUR – Asean and China have signed an upgraded free trade deal, which covers emerging areas such as the digital economy, green economy and supply chain connectivity.

Malaysian Investment, Trade and Industry Minister Tengku Zafrul Aziz signed the pact on behalf of Asean with Chinese Commerce Minister Wang Wentao at the Asean Summit in Kuala Lumpur on Oct 28.

Malaysian Prime Minister Anwar Ibrahim, who is Asean chair, lauded the signing of the pact as an important milestone in economic cooperation, while Chinese Premier Li Qiang called it a new opportunity to deepen economic ties between the two sides.

The Asean-China Free Trade Agreement (ACFTA), which kicked in from 2010, is China’s first FTA and also Asean’s first FTA with an external dialogue partner. Talks on the latest pact, ACFTA 3.0 Upgrade,

and came after the second version of the FTA took effect from November 2018.

The latest pact contains enhanced commitments on transparency and simplified Customs procedures, said Singapore’s Ministry of Trade and Industry (MTI) in a press statement. For example, both sides have agreed to boost transparency in health and safety regulations for food, animals, plants and other products to save time and costs for companies.

MTI said the upgraded pact can also help businesses in South-east Asia and China capture new opportunities in artificial intelligence and financial technology.

It also introduces new commitments against unfair or anti-competitive business practices and enhances protections for online and cross-border consumers.

At the Asean-China Summit held after the signing of the ACFTA 3.0 Upgrade, Prime Minister Lawrence Wong urged all parties to move swiftly to ratify the pact. “We should ratify it soon and implement this agreement effectively, so that our businesses and people can start to benefit from it,” he said.

Analysts who spoke to The Straits Times view the latest agreement as a chance for Asean businesses to diversify their export destinations beyond the United States market in the wake of tariffs imposed by US President Donald Trump’s administration. But they added that the influx of Chinese goods into the 11-nation grouping remains a key issue that needs to be taken up with Beijing.

While Asean-China trade reached US$777.2 billion (S$1 trillion) in 2024, Beijing recorded a

with Asean  – more than triple the figure a decade ago.

The surplus underlines the pressure on South-east Asia’s export-oriented manufacturers. They face a deluge of Chinese goods often sold below their production costs and might find themselves squeezed out of business.

Mr Lee Heng Guie, executive director of Malaysia’s Socio-Economic Research Centre, suggested that Asean member states could raise the issue of overcapacity with China in “an open and sincere dialogue”, to talk about the negative impact on Asean’s micro, small and medium-sized enterprises.

He told ST that Asean enterprises can use the low tariffs, streamlined regulations and improved Customs clearance under the ACFTA 3.0 Upgrade to enhance their competitiveness.

Beijing has been organising the China International Import Expo since 2018 as a platform for Asean countries to showcase their products to the Chinese market, he added.

Assistant Professor Tan Chee Meng, a China expert at the University of Nottingham Malaysia, said Asean could invest in sectors such as tourism, medical tourism and education – areas that Asean has a competitive advantage in and which caters to China’s strong demand – to help reduce the trade deficit.

He told ST: “As China aims to transition from a middle-income economy to a high-income nation, its manufacturing sector may experience a slowdown. Vietnam, Indonesia, Cambodia and Laos, with their lower labour costs, could be well positioned to take over the manufacturing of consumer products previously produced in China.”

Dr Tee Chwee Ming, a senior lecturer from Monash University Malaysia School of Business, told ST that Malaysia could tap its competitive advantage in the halal food and beverage industry to enter the China market via the upgraded China-Asean FTA.

“Malaysian firms facing US tariffs and future markets uncertainties would benefit from new markets.” he said.