Opinion, Jakartapost Newspaper, 02/04/2010 China’s emergence and its impact on ASEAN Ali Rama The writer is a lecturer at the Economics and Business Faculty, Syarif Hidayatullah Islamic University, Jakarta, and currently is a postgraduate student at the International Islamic University, Malaysia. Many analysts claim that China is the future of Asia and of the world. This can be seen from the statistical data of China’s economic growth, China’s defense budget, China’s demographic data and in its participation in regional and global cooperation, such as economic cooperation with the World Trade Organization (WTO) and the Asia-Pacific Economic Cooperation (APEC). In a regional context, China and the ASEAN countries have agreed to establish the free trade zone of China and ASEAN (ASEAN-China Free Trade Area, ACFTA) which started in January this year China’s participation in world economic forums shows that China has become the engine of the world economy. China had US$1.8 trillion of foreign exchange reserves in 2008 and is the third-largest exporting country in the world, with a volume of $3.24 trillion. China is the largest exporting country in Asia. This fact places China in an important position and gives it and important role in the world economy. The rise of China is not going to happen without impacting on the world and particularly on the 10-member Association of Southeast Asian Nations (ASEAN). This region may be among the most affected by China’s economic emergence. How will China’s growing economy affect the ASEAN countries? Two of the ways in which China’s emergence is affecting the economies in ASEAN are in the production of similar but cheaper export products and the ability of China to attract more foreign domestic investment (FDI) than any of the countries in the ASEAN. The sheer size of China’s domestic market has an indirect effect on the economies in the ASEAN. China, with its 1.3 billion people, compared to the whole of the ASEAN population of around 500 million, will attract investors and businesses who want to locate or relocate their businesses to China to benefit from its huge domestic market. China’s domestic market and its economy are larger than those in the whole of the ASEAN region. The smaller nature of the domestic consumer markets of these countries makes them dependent on exports to boost their economies. With 1.3 billion people, China affords an abundant supply of cheap labor, which will lead to a low-cost economy. Currently, China produces the same goods for the global marketplace at a cheaper cost than most of the ASEAN countries. As a result, most of the countries in Southeast Asia have lost their market share to China. This is what is most feared with the full implementation of the ACFTA in 2010, especially in those countries that have similar goods and markets globally. It is feared that China could flood their markets with the same goods at cheaper prices, and thus they will lose their market share, losing their jobs and their competitiveness.