China and the Association of Southeast Asian Nations (ASEAN) have signed a major upgrade to their free trade agreement, marking one of the most ambitious expansions of regional economic cooperation since the pact was first established in 2010.
The new deal — known as the ASEAN–China Free Trade Area 3.0 — aims to deepen integration in the digital economy, green industries, and other emerging sectors, representing a key step in China’s effort to diversify its export economy amid escalating trade tensions with the United States.
The agreement was finalized during the ASEAN Summit held in Malaysia on Tuesday, attended by Chinese Premier Li Qiang and President Donald Trump, who began his Asia tour in Kuala Lumpur. It reinforces Beijing’s intent to tighten its economic ties with Southeast Asia at a time when U.S. tariffs are reshaping global trade flows and forcing China to seek new partners for its industrial output.
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According to ASEAN statistics, trade between China and the bloc reached $771 billion in 2024, making ASEAN China’s largest trading partner. With a combined GDP of about $3.8 trillion, ASEAN represents both a crucial export destination and a supply chain hub for Chinese manufacturers navigating shifting tariff barriers and reconfiguration of global production networks.
Premier Li described the agreement as a “landmark achievement in regional economic cooperation,” adding that both sides “must accelerate trade and investment liberalization and strengthen industrial interdependence.” He emphasized that the new framework would ensure that regional trade remains stable despite global headwinds, positioning ASEAN as an indispensable partner in Beijing’s long-term trade strategy.
The ASEAN–China Free Trade Area 3.0 follows months of negotiation that began in November 2022 and concluded in May 2025, shortly after President Trump’s administration intensified its tariff measures on several major economies, including China. The upgraded deal introduces new provisions for cross-border digital trade, e-commerce regulation, clean technology, and sustainable industrial practices — all aimed at modernizing the economic relationship between both sides.
Singapore’s Prime Minister Lawrence Wong said the new accord would “reduce trade barriers, strengthen supply chain connectivity, and unlock opportunities in future growth areas.” He noted that the inclusion of digital and green sectors will create fresh pathways for ASEAN economies to participate in the global value chain while benefiting from China’s expanding consumer market and manufacturing infrastructure.
The pact also aligns with China’s broader economic strategy of diversifying away from overreliance on Western markets. As Washington continues to impose restrictions on Chinese exports — including tariffs, semiconductor curbs, and sanctions targeting strategic industries — Beijing has been working to deepen its economic footprint across Asia, Africa, and Latin America. Analysts see the ASEAN partnership as one of China’s most effective avenues for offsetting potential losses from U.S. trade measures.
Beijing has framed the 3.0 upgrade as a demonstration of its commitment to economic openness and multilateralism, despite concerns from Western governments over its export controls on rare earths and other critical minerals. While China maintains these measures are for national security, critics argue that they undercut its message of fair trade and transparency.
The agreement also builds on the foundation of the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade bloc, which includes both China and ASEAN and covers about one-third of global GDP. RCEP’s first in-person summit in five years, held in Kuala Lumpur a day earlier, highlighted growing regional alignment on trade liberalization even as geopolitical tensions simmer in the background.
Yet, those tensions were palpable during the ASEAN meetings. Philippine President Ferdinand Marcos Jr. sharply criticized China’s “aggressive actions” in the South China Sea, warning that Beijing’s conduct risked destabilizing the region. In response, China’s foreign ministry accused Manila of provocation. The disputed waters, rich in resources and strategically important, have long been a flashpoint between China and several ASEAN members, including Vietnam, Malaysia, and Brunei.
Premier Li sought to calm tensions, calling for “strategic mutual trust” and an accelerated conclusion of a long-delayed Code of Conduct for the South China Sea.
“We must strengthen dialogue and mutual understanding to safeguard peace and stability,” Li said, stressing that economic cooperation should not be overshadowed by security disputes.
Prime Minister Wong echoed this sentiment, noting that while “differences of views” are inevitable, all member states agree that “peace, stability, and freedom of navigation” are critical for maintaining prosperity in the region.
The backdrop to the agreement is a volatile global trade environment dominated by the Trump administration’s tariff campaign against China. The tariffs have disrupted global supply chains, prompting both sides to seek a temporary truce. Negotiators from Washington and Beijing met in Kuala Lumpur over the weekend and agreed to extend the current trade pause, setting the stage for a meeting between Trump and Chinese President Xi Jinping in Seoul later this week.
Since Trump departed from Malaysia on Monday, China has accelerated efforts to consolidate its economic partnerships across Asia. Premier Li, in a separate address, warned against rising protectionism, saying, “The world must not slip back into the law of the jungle where the strong prey on the weak. We must uphold free trade and create a high-standard regional trade network that benefits all.”
Analysts say the upgraded ASEAN–China pact is not only a diplomatic success for Beijing but also an economic necessity. Through deepening regional integration, China is expected to cushion itself from U.S. tariffs while ensuring continued access to vital markets for its exports.