FazTimes Media, Kuala Lumpur, Malaysia, 28 Oct: A significant change that could transform money and trade in Asia occurred when China and the Association of Southeast Asian Nations (ASEAN) established a new and improved free trade agreement. This move brings the two groups closer together, even as they face trade challenges with the United States.

The deal was signed during the 47th ASEAN Summit in Kuala Lumpur on Tuesday, with Chinese leader Li Qiang and Malaysian leader Anwar Ibrahim both present at the event.

The deal, dubbed the “ASEAN-China Free Trade Area (ACFTA) 3.0,” aims to broaden cooperation in several critical areas, including infrastructure development, digital transformation, green energy, trade facilitation, and people-to-people exchanges, according to a statement from China’s State Council.

This upgraded framework builds on the original 2010 ASEAN-China Free Trade Agreement, marking the third phase of an evolving partnership that has grown increasingly significant in the face of U.S. President Donald Trump’s protectionist trade policies.

A Strategic Economic Alliance

Over the past decade, China and ASEAN have become each other's largest trading partners. This change happened because of a strategy called "China Plus One," which economists talk about. This strategy sped up when Trump started a trade war with China in 2018, pushing big companies to spread out their supply chains across Southeast Asia.

In the first nine months of 2025, trade between China and ASEAN hit $785 billion, which is a 9.6 percent increase compared to the same period last year. A lot of this trade involves goods used in manufacturing processes, but more Chinese consumer products are also showing up in Southeast Asian markets.

In a speech to ASEAN leaders, Premier Li Qiang talked about how the two regions are becoming more economically connected. He also stressed the need to keep markets open, especially during times of uncertainty. He added that the new pact would allow for “expanded and higher-quality cooperation” and promised Beijing’s continued support for the region’s digital and green transitions.

A Response to U.S. Tariffs

The upgraded pact arrives at a critical time for both China and ASEAN. As reported by Al Jazeera, Chinese officials view the new agreement as a strategic counterbalance to the rising trade tensions with the United States and the European Union.

Zhiwu Chen, a professor of finance at the University of Hong Kong, told Al Jazeera that the 3.0 version of the trade pact reflects mutual necessity: economic integration is crucial for China, as its trade tensions with the US and EU have been rising, and China needs ASEAN countries. This is also a time for ASEAN to seize the opportunity for the same reason.

Chen described the deal as a “win-win outcome,” providing ASEAN countries with expanded access to Chinese markets and investments while giving Beijing a stable trading partner network amid Western trade restrictions.

Trump’s Trade War Looms Large

The shadow of Donald Trump’s trade war loomed heavily over this year’s summit. In his speech, Premier Li Qiang directly criticized unilateral trade policies that have disrupted the global supply chain.

“Unilateralism and protectionism have seriously disrupted the global economic and trade order. External forces are increasingly interfering in our region, and many countries have been unfairly subjected to high tariffs,” Li said, in a veiled reference to the United States.

According to BBC News, Trump’s tariffs—some of which reach 100 percent on Chinese goods—have sparked global concern and prompted countries to seek regional alternatives to maintain growth and investment stability.

While Trump also attended the ASEAN Summit on Sunday, his focus was on bilateral trade deals rather than multilateral frameworks. The White House announced new agreements with Cambodia and Malaysia, along with framework arrangements with Thailand and Vietnam, setting tariff rates between 19 and 20 percent for these nations.

These one-on-one deals highlight Trump’s “reciprocal tariff policy,” which seeks to impose equal tariffs on U.S. partners unless they match American trade terms—a move widely seen as protectionist.

Economic Balancing Act

Economists argue that the ASEAN-China 3.0 pact could help the region maintain stability amid the global turbulence caused by U.S. trade actions. The agreement’s inclusion of digital economy and green technology cooperation points toward future-oriented priorities that align with global trends.

“ASEAN countries are now diversifying their trade relations beyond the West,” said Dr. Liew Yuen, an international trade analyst based in Singapore. “With the U.S. focusing on tariffs and China focusing on connectivity, ASEAN finds itself at the center of a strategic tug-of-war. ” However, this new pact provides ASEAN with the leverage to engage with both sides from a strong position.

In addition to trade facilitation, the agreement also places a strong emphasis on infrastructure investments, particularly under China’s Belt and Road Initiative (BRI).

The Numbers Behind the Pact

China and ASEAN's trade relationship has stayed strong despite challenges. Reuters reports that the amount of trade between them has grown almost 15 times since the year 2000. This growth is due to increased demand for items such as electronics, machines, and basic materials.

In the new deal, both sides have agreed to:

Promote green transition technologies, including renewable energy projects.
Expand investment opportunities in sustainable industries.

ASEAN's smaller economies, including Laos, Cambodia, and Myanmar, stand to gain from these moves as they enhance their access to financing and Chinese industrial know-how.

Trump-Xi Meeting on the Horizon

While Beijing was celebrating the new deal in Kuala Lumpur, all eyes turned toward the upcoming meeting between Trump and Chinese President Xi Jinping in South Korea later this week.

The agreement, however, remains tentative, and experts caution that tensions could flare again if either side fails to meet expectations.

“Even if there’s a temporary truce, structural rivalry between the U.S. and China won’t disappear overnight,” noted Professor Chen. “That’s why deals like ASEAN-China 3.0 are essential—they provide stability in an unstable world.”

A New Chapter for Regional Trade

For ASEAN, the upgraded deal signals both opportunity and caution. While closer economic ties with China promise growth and investment, some analysts warn that over-reliance on Beijing could limit the bloc’s strategic flexibility.

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