July and August 2014
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China’s Rising Manufacturing Costs: Challenges and Opportunities
China-ASEAN FTA
Many China commentators have been focusing on the increasing labor costs in China, and noting how many China-based businesses
are now struggling in the face of rising wages. The China-ASEAN free trade agreement (FTA), which was signed off in 2002 and came into
effect more than three years ago, offers a way out by allowing companies to reposition manufacturing to other low cost areas of Asia, yet
still be able to service the China market via the duty-free imports permitted under the FTA. With ASEAN including the vibrant economies
of Indonesia, Malaysia, Philippines, Singapore, Thailand andVietnam, together with smaller regional players such as Brunei, Cambodia, Laos
and Myanmar, this single agreement is reshaping the coordinated development of China-ASEAN manufacturing.
The ASEAN–China Free Trade Area is the world’s largest free trade area in terms of population and third largest in terms of nominal GDP
after the European Union and NAFTA. The original FTA reduced tariffs on nearly 8,000 product categories, or 90 percent of imported goods,
to zero. The average tariff rate on Chinese goods exported to ASEAN is now only 0.6 percent, down from 12.8 percent, while the tariff rate
on ASEAN goods exported to China also fell from 9.8 percent to 0.1 percent.
These favorable terms have taken effect in China and original ASEANmembers, Brunei, Indonesia, Malaysia, the Philippines, Singapore and
Thailand. Cambodia, Laos, Myanmar and Vietnam will implement these terms in 2015. Details of the China-ASEAN FTA can be found on
which also includes regular updates on China’s tax treaties throughout the region.
For a consultation on how your business can benefit from the China-ASEAN FTA,
please email
