ASEAN-China FTA plan gets ADB thumbs up

ASEAN-China FTA plan gets ADB thumbs up

Cecil Morella, Agence France-Presse, Manila

The Asian Development Bank (ADB) on Friday backed plans by
China and 10 neighbors to create the world's largest free trade
area (FTA), saying Beijing's growth engine could take up part of
the slack in the United States, Europe and Japan.

China and the Association of Southeast Asian Nations (ASEAN)
reached broad agreement at a meeting in Brunei on Tuesday in
working toward the creation of the FTA.

Brahm Prakash, assistant chief economist of Manila-based ADB
said Beijing was "emerging as a major engine of growth in the
region," and that its formal entry into the World Trade
Organization (WTO) this year would have a "positive impact"
overall for Asia.

He predicted a "major restructuring of the developing Asian
economies" over the next few years as China opens up its economy.

The ADB forecast Friday that the Chinese economy would grow by
7.3 percent this year, with the Sept. 11 terrorist attacks on the
United States having a much more muted effect than in other
countries "due to Beijing's relatively low dependence on exports
and its strong domestic demand."

In its first full year of membership to the WTO next year,
China's economic growth would be sustained at 7.0 percent, it
added.

"Certainly, with the 2001 numbers, it would look like the
world economy would grow by 1.0 percent and meanwhile developing
Asia (would grow by) 3.4 percent," Prakash said.

Asked if the Chinese economy could be relied on to fill the
void caused by the absence of growth in the major industrialized
economies on developing Asia, Prakash said Chinese growth "is
very important in terms of supporting" its neighbors' fortunes.

"It cannot totally replace the large economies like the United
States, European Union and Japan," he added.

The proposed ASEAN-China FTA would cover two billion
consumers, making it the biggest in the world according to
population. The region has a combined gross domestic product of
US$2 trillion, and two-way trade of $1.23 trillion.

Two-way trade has been rising steadily since the early 1980s,
reaching about $40 billion last year, with China in deficit by
$5.0 billion.

Meanwhile, the ADB said on Friday that while China's WTO
membership would be positive in the long run, "adjustments to be
made in the short term will have social costs.