10 - Counter-Trade in the Framework of China-ASEAN Trade

Summary

Over the past decade or more, trade between China and ASEAN countries has grown considerably. But there do exist some difficulties and problems. In the last few years, China's trade with some ASEAN countries has come to a standstill or even declined. This is indeed a very worrisome situation. How can the expansion of trade between China and ASEAN countries be promoted? Can counter-trade, a subject of much discussion, play a positive role in expanding China's bilateral trade with ASEAN countries? These are the questions dealt with in the present paper.

I. Developments and Problems in China-ASEAN Trade

1. Developments over the Past Decade

In the early years of the People's Republic of China (PRC), political considera- tions prevented the country and most ASEAN countries from entering into any trade relationship with one another. In the sixties, of all ASEAN members, only Singapore and Indonesia had direct trade relations with China, while the rest were trading indirectly through either Hong Kong or Singapore. Since 1967, direct trade between Indonesia and China had been suspended.

In the seventies, Malaysia, the Philippines, and Thailand resumed trade exchanges with China even prior to the restoration of diplomatic relations. Singapore had no diplomatic ties with China, but none the less maintained good trade relations. In 1978, the two governments signed a trade agreement and subsequently set up commercial offices in each other's capital. Indonesia reached an understanding on non-governmental trade with China in November 1985.

Over the past decade, China's trade with ASEAN countries has increased very rapidly. According to statistics from China's General Administration of Customs, the volume of trade between Ghina and the six ASEAN countries increased from US$524 million in 1975 to US$3,964 billion in 1985, a near seven-fold increase n ten years. Of this, China's exports to ASEAN countries increased from US$402 million to US$2,829 billion, and imports from ASEAN rose from US$162 million to US$1,135 billion.

In 1986, however, China-ASEAN trade was reduced to US$3,358 billion, a fall of 15.3 per cent over 1985. China's exports in particular dropped sharply from US$2,829 to US$1,878 billion, caused mainly by plummeting international oil prices.