A Research On The Economic Effects Of China-ASEAN Free Trade Area

China-ASEAN Free Trade Area (CAFTA) which China and ASEAN reach agreement in 2002 is a symbol that China began to take part in regional economic integration actively. It's also the deepest integration organization which China has taken part in. Up to December 2007, China and ASEAN has reached several integration Agreements and put them to practice many South-South integrative organizations are not successful as they do not generate obvious trade creating effects and FDI creating effects. With regard to this situation, it's very necessary to analyze the economic effects of CAFTA, conclude the fruits and barriers since the start of the integration, and put forward suggestions as how to further the trade and investment development between China and ASEAN countries, which are of urgent and realistic meanings for our country's economic integration with ASEAN afterwards.Firstly, with the help of the analysis of the background and process of CAFTA and summarization of the researches on economic integrations, this paper establish the theoretical basement and the research frame of how to analyze the economic effects of CAFTA afterwards. The main part of this paper is the analysis of the integrative trade effects and the integrative FDI effects of CAFTA.By using methods such as Revealed Comparative Advantage (RCA) and Trade Complementary Indexes, this paper has found that about half of the trade commodities between China and ASEAN are remarkably complementary, so as to theoretically prove that CAFTA can generates remarkable trade creating effects. Then it uses a modified Balassa model test whether the trade creating effect really happen in the reality, the result of which gives a positive answer, while the trade diverting effect is not remarkable in the same time. Finally this chapter specifically examines the trade development between China and ASEAN since the integration, and then concludes its results and characteristics.According to the integrative investment effect theory, CAFTA should generate remarkable FDI effects within this area. But with the help of positive analysis, it's found that integration has no significant effect on the FDI flows inside this region, whether it comes from outside or inside CAFTA. The FDI creating effect and FDI diverting effect are both insignificant. The FDI flows between China and ASEAN are still in the state of small amount and low growth rate. The last part of this chapter discusses why FDI effects are not significant in CAFTA at the present.In the last chapter, based on the conclusion of the CAFTA economic effects currently and the analysis of the problem existed in the integration construction, this paper put forward some key proposition that how to further integration construction and promote the trade development and FDI development between China and ASEAN. China's government must actively adjust the industry configuration of our country, and strive to reach FDI cooperation regulations with ASEAN countries. In the meantime, we should improve the investment environment, and provide convenience service to the enterprises which have interests in investing in ASEAN countries. In the same time, Our enterprises should establish a right strategy to invest in ASEAN countries.