SHANGHAI, Feb. 11 (UPI) -- If you can't beat 'em, join 'em. This seems to be the consensus of a growing number of Asian countries, concerned about China's emergence as an economic powerhouse, which are queuing up behind Beijing in a push to form a regional free-trade zone within the next decade.
For countries such as Thailand, Malaysia and Indonesia -- that have watched with unease as a tide of foreign direct investment and manufacturing jobs flow past them into China -- the idea of aligning with their gigantic neighbor to form a regional trade bloc is looking increasingly more attractive.
In December, China signed an agreement with the 10-member Association of Southeast Asian Nations that lays the groundwork for creating what would become the world's biggest free-trade zone. Under the deal, ASEAN would eliminate most tariffs on goods and liberalize trade in many services, while paving the way for more cross-border investment.
A report by China and ASEAN members early last year identified oil, petroleum, food, electronic goods and tourism as key sectors providing opportunities for regional trade.
China, which manufactures goods and provides services generally more cheaply than ASEAN members, has the upper hand in a free-trade deal, both in size and substance. As such, China would preside over a powerful and influential regional trade bloc -- taking on a principal role, similar to that of the United States, in relation to Mexico and Canada, in the makeup of the North American Free Trade Agreement.
Chinese economists tend to downplay the concerns of the ASEAN members, arguing that by taking a leading role in a regional trade bloc, China can give a powerful voice to less-developed Asian countries.
"We are simply following the global trend of economic integration," Zhao Jinping, a senior researcher with China's State Council Development Center in Beijing.
"As the leading economy in Asia, China hopes that the creation of a free-trade zone will reduce the region's dependence on developed countries such as the United States, boosting export markets and promote more foreign investment in the Asia-Pacific region."
Others say the world's most populous nation is merely flexing its muscles to help the region weather the slowdown of the global economy, the war on terrorism and the lingering effects of the late '90s Asia crisis.
"If we are going to avoid the long-term effects of an economic slump in other regions of the world, Asian countries need to put aside our political and strategic concerns and devise concrete solutions to current regional economic problems," said Wang Jiang, an economics professor at Shanghai Normal University.
While many Asian nations fear China's rising clout in the region, they also appear to be profiting from its growth.
Trade between China and the 10-member ASEAN grouping rose to $42 billion last year from about $24 billion five years earlier. And Japan, Taiwan and South Korea have huge investments in China.
A recent report by Deutsche Bank challenges the conventional wisdom of China's dominance, arguing its economic growth is not as damaging to other Asian countries as economists have asserted.
The report said China has become a big export market for many ASEAN members. In 2000, it imported $140 billion worth of goods from Southeast Asia, a huge rise from $20 billion in 1984.
The report said China's share of foreign direct investment entering the region has risen only marginally. In 1995, China took in 53 percent of new FDI, while as of 2000, its share had only risen to 54 percent.
Meanwhile, South Korea substantially raised its share of FDI, from 2 percent in 1995 to 13.6 percent in 2000, and Taiwan also experienced an increase, from 2.3 percent in 1995 to 6.5 percent in 2000, it stated.
"In terms of growth in foreign direct investment and exports, empirical evidence suggests that some Asian economies have gained while others have lost, which may not be necessarily attributable to China's emergence," the report said. "China's emergence has had many positive impacts of the rest of Asia."
Although China's exports rose from 1.8 percent of the world total to 4 percent in the past decade, ASEAN members' exports increased from 4.9 percent to 6.9 percent over the same period, the report said.
"China's emergence as an economic and political superpower will likely change the economic division of labor in Asia, but that does not mean that other countries must always lose out," it said.
David Lee, a Shanghai-based private analyst for several South Korean companies, said a major concern of many ASEAN countries, at least privately, is whether they will be forced to dance to Beijing's tune in the event that the regional free-trade zone is established -- becoming "eunuchs for a Chinese empire."
"We are not opposed to China taking the lead in a free-trade zone, but what we are very concerned about is the possibility that China would begin dictating the terms of trade and commerce in the region," he said.
Separately, China is also involved in negotiations with South Korea and Japan to create a tri-partite trade system -- in part, analysts say, to ease tensions over a loss of investment to China and avert possible trade disputes as the China-ASEAN bloc takes shape.
Despite all the hype emanating from Beijing, analysts say the creation of a feasible free-trade zone could be years, if not decades, in the making. Trade barriers, rampant product piracy and protectionism plague many of the ASEAN nations' markets and could be difficult obstacles to overcome.
"There are so many wrinkles in this plan, most notably, the resounding lack of financial transparency that exists in China," said one Asian analyst. "Some ASEAN countries are asking 'what will happen if China's economy goes bust, dragging the rest of the region down the drain?' This is a serious concern for them."
