China and the Association of Southeast Asian Nations (ASEAN) signed an upgraded free trade agreement (FTA) on Tuesday, expanding cooperation into the digital and green economies. The deal, known as the ASEAN-China FTA 3.0, was finalized at a leaders’ summit in Malaysia, marking a new phase in a partnership that began in 2010.
ASEAN is China’s largest trading partner, with $771 billion in bilateral trade last year, while the bloc’s combined GDP stands at $3.8 trillion.
Deal Highlights
The upgraded FTA aims to cut trade barriers, strengthen supply chains, and open new markets in sectors such as agriculture, pharmaceuticals, and digital services. Negotiations began in November 2022 and concluded in May 2025, shortly after U.S. President Donald Trump launched a new wave of global tariffs.
“This upgrade will unlock opportunities in future growth areas,” said Singapore Prime Minister Lawrence Wong, while Chinese Premier Li Qiang called for faster trade liberalization and industrial integration.
Why It Matters
The deal strengthens Beijing’s economic influence in Southeast Asia just as it faces escalating U.S. trade tariffs. Analysts say the agreement could help buffer regional economies against Washington’s protectionist policies.
However, the pact also comes amid skepticism about China’s export controls on rare earths and its territorial assertiveness, raising questions about whether economic integration can offset geopolitical mistrust.
Geopolitical Flashpoints
Tensions in the South China Sea shadowed the summit. Philippine President Ferdinand Marcos Jr. accused China of “aggression” following repeated maritime confrontations, while Beijing blamed Manila for “provocation.”
China claims nearly the entire waterway, overlapping with the exclusive economic zones of several ASEAN members, including Vietnam, Malaysia, and the Philippines. Li urged nations to accelerate talks on a Code of Conduct to prevent future clashes.
Trade War and Regional Rivalry
The announcement came as Beijing and Washington extended their fragile trade truce, ahead of a meeting between Trump and Chinese President Xi Jinping later this week in Seoul. Li used the moment to promote China’s role as a defender of open markets, warning against “the law of the jungle where the strong prey on the weak.”
Both China and ASEAN are also members of the Regional Comprehensive Economic Partnership (RCEP) the world’s largest trading bloc, covering about 30% of global GDP.
China: Seeking to consolidate its role as ASEAN’s top trade partner and counterbalance U.S. tariffs.
ASEAN Members: Hoping for expanded market access and investment while managing dependence on both Washington and Beijing.
United States: Watching closely as China deepens influence in a region central to global supply chains.
What’s Next
China will push for early implementation of the upgraded FTA and a binding South China Sea Code of Conduct. With Beijing hosting APEC 2026, the agreement underscores its long-term ambition to lead a China-centered Asia-Pacific trade network even as strategic tensions continue to simmer beneath the surface.
With information from Reuters.
