The strengthening of ASEAN–China economic collaboration will lead to a changed Southeast Asian development pathway by 2025 that transforms the region into a complex network of supply chains and high-speed infrastructure along with established trade systems.
ASEAN and China’s partnership has led to record-breaking growth because ASEAN’s large market, united with China’s manufacturing capabilities, reached bilateral trade of USD 1 trillion in 2025 and doubled two-way foreign direct investment to USD 450 billion with an 8 percent annual growth rate. The visible growth statistics hide unequal bargaining power dynamics and industry competition challenges, and potential geopolitical conflicts. A thorough examination shows that ASEAN needs specific policy adjustments to protect its long-term benefits from technology transfer challenges and insufficient local value creation and external shock vulnerabilities.
ASEAN established its position as China’s top trading partner during the 2010s, and this position remained unchanged through 2025 as Southeast Asian intermediate goods exports to China increased 14 percent annually to prove the region’s inclusion in China’s production networks. The Jakarta–Bandung High-Speed Railway reached full commercial operation, while the China–Laos Railway increased its freight capacity by 100 percent, thus reducing logistics costs by 20 percent and shortening network transit times by almost 50 percent. RCEP and the upgraded China–ASEAN Free Trade Area (CAFTA 3.0), launched in 2025, brought major changes to digital connectivity. The elimination of 92% of trade tariffs, combined with standardised rules of origin and digital trade frameworks, enabled cross-border e-commerce, resulting in a 25% rise in regional tech exports. The economic integration between ASEAN countries led to a 5.6 percent average GDP growth rate during 2024 and 2025, which exceeded worldwide averages and demonstrated real economic advantages from deeper integration.
The rapid pace of change has created substantial disruptions in the process. The flow of low-cost Chinese-made products resulted in the decline of developing ASEAN industries during 2025 because Indonesia’s textile industry lost 40,000 jobs despite implementing protective tariffs, and Thailand experienced 1,200 small to medium-sized enterprise closures in furniture and electronics from January through June 2025. The supply chain for automotive parts faces the worst “industrial hollowing” effect because Chinese electric vehicle assemblers who built a new $200 million battery plant in Vietnam started a price war that endangers regional auto parts suppliers. The competitive market forces have intensified the economic differences between member states of ASEAN, which led to a significant difference between Singapore’s USD 102,000 GDP per capita and the below USD 1,900 in Laos and Myanmar, while making it difficult to reach consensus on trade remedies and subsidy policies through ASEAN’s consultative framework.
The economic pressures have worsened because of rising geopolitical conflicts. The United States’ Section 301 tariff policy has created uncertainty in the export-focused approach of the region because it threatens to impose duties on ASEAN transshipment activities of Chinese intermediate goods. ASEAN’s strategic position in the US-China rivalry has become a major concern, which led Manila and Jakarta to create trilateral partnerships with Washington to get exemptions, while Hanoi and Kuala Lumpur deepened ties with the European Union for alternative market access. The strategic sector investments made by Chinese state entities in telecommunications and critical minerals, and green energy sectors triggered regulatory actions from Malaysia and the Philippines, which introduced screening protocols for transparent funding and potential dependency protection in early 2025.
ASEAN member states have developed strategic leadership capabilities to determine how they will engage with external partners. The EV policy of Thailand sets a 50 percent local content requirement for 2027, which forces BYD and SAIC to develop domestic supply chains for batteries and electronic modules. Vietnam has changed its renewable energy policy by giving priority feed-in tariffs to projects that manufacture raw polysilicon domestically to cut down USD 1.2 billion in annual imports by 2026. The Malaysian government imposed stronger intellectual-property regulations, which forced Chinese toy manufacturer Pop Mart to establish its design and branding operations in Penang while creating innovative clusters to protect domestic innovations. The elevation of Indonesia’s partnership with China to a comprehensive strategic level through President Prabowo’s state visit in March 2025 brought skills-transfer program provisions for infrastructure contracts that provide benefits to local engineers and technicians through high-speed rail and port modernization projects.
The ASEAN economic dynamism requires policy recalibration that extends beyond current measures. The ASEAN+3 Macroeconomic Research Office needs to strengthen its regional safety nets by expanding its swap lines and developing additional countercyclical fiscal tools to protect member states from sudden market demand fluctuations. The organization should boost its dedication to technology absorption through the establishment of regional centers of excellence for emerging sectors such as semiconductors, green chemicals, and fintech, while implementing joint research grants and mobility programs. The implementation of institutional enhancements represents a critical necessity because they need to simplify project approvals under CAFTA 3.0 and strengthen dispute resolution systems, and enhance data accessibility to reduce costs for investors. The maintenance of industrial diversity depends on a new trade defense strategy that protects vulnerable sectors without restricting competition excessively.
ASEAN–China cooperation has created historic economic opportunities, which have both expanded trade volumes and modernized infrastructure while driving regional economic expansion. The advantages gained from ASEAN-China cooperation depend on ASEAN’s ability to use its combined market power and enforce mutual advantages while protecting itself from unequal dependencies. ASEAN can move past the “China shock” by establishing technology transfer frameworks while adding value locally and building stronger resilience systems to create an inclusive growth model. This strategic approach will maintain Southeast Asia’s positive trajectory while making the bloc an active developer of its success in the changing multipolar world order.
Source: Eurasia Review
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<p>Time: 2024 By: Ministry of Industry and Trade</p>
