The Region in International Business

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The Region in International Business

1 Regional Economic Integration Status Quo of China2
2 Political Factors behind Regional Economic Integration Arrangements3 3 Effects of Regional Economic Integration Arrangements on Economic Growth5 4 Challenges to the Regional Economic Integration Arrangements of China9 Conclusion11

Economic integration is established to remove the trade barriers among members, and to build various kinds of cooperation and mutual assistance relationship. China has made great progress in the development of regional integration (Hidetaka, 2008). This essay analyses the regional economic integration arrangements of China. It firstly introduces the regional economic integration status quo of China. Then it analyzes the political factors behind the regional economic integration arrangements of China by studying the case of CAFTA (China-ASEAN Free Trade Area). Following this, it further explains how these arrangements have impact on the economic growth of China through trade, FDI (Foreign Direct Investment) and finance. At last, it analyzes the existing obstacles and challenges facing these arrangements. 1 Regional Economic Integration Status Quo of China

Since the first regional trade agreements, Bangkok Agreements, signed in 2001, the development of regional integration of China has made great progress. According to the degree of market integration, economic integration is divided into six types. Among them, Preferential Trade Arrangements and Free Trade Area are two major lower-level organizational forms of China’s regional economic integration (Enzo, 2012). China’s integration stays in relatively low level due to the late start. The other stages including customs union, common market, economic union, complete economic integration are more advanced. The APEC (Asia-Pacific Economic Cooperation) is the largest regional economic organization in Asia-Pacific. China is deeply influenced by APEC as the largest developing country of the organization. CAFTA is the first free trade area that China joined formally, which is one of regional organizations consisting mainly of developing countries. China and ASEAN members are developing countries whose economic leverage is modest. The economic growth of China has a high reliance on external market (Hidetaka, 2008). The emergence of CAFTA is exactly a response and solution to the rapid maturity of regional economic integration and the negative impact of economic globalization. Since the establishment of CAFTA, the China-ASEAN trade has become a huge economy covering 11 countries or 19 billion people. CAFTA has become the third-largest free trade area around the world, which is just behind EU (European Union) and NAFTA (North American Free Trade Area). The targets of CAFTA are to promote the dialogue and cooperation between China and ASEAN enterprises, ant to promote trade and investment relationship between China and ASEAN (Enzo, 2012). 2 Political Factors behind Regional Economic Integration Arrangements China’s participation in regional economic integration has to take not only economic factors but also political factors into consider. When making regional economic integration cooperation with neighboring countries and the least developed countries, political consideration is especially important. And sometimes the sacrifice of some economic benefits is necessary (Gregory & Richard, 2011). For example, the negative attitude of Russia towards China’s vision of establishing the Free Trade Area of Shanghai Cooperation Organization dues to the fear of China’s dominant economic power in Central Asia. The political factors behind China’s regional economic integration arrangements can mainly divided into three aspects, including political assistance, geopolitics and political springboard. 2.1 Political assistance

The China-Africa trade accounts for only a tiny part of external trade. However, there are many Africa...
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