Guangdong-ASEAN Trade Effect Analysis Under CAFTA Framework

Since China and ASEAN established its dialogue relations in 1991, bilateral trade has been expanded nearly tenfold. In 2002, the two sides signed the ―China-ASEAN Economic Cooperation Framework Agreement‖, the tariff rules has been effective since 2010, which marked the founding of ―China- ASEAN Free Trade Area‖(CAFTA). With the implementation of the ―Belt and Road‖ strategy, Guangdong province as the starting point of ―CAFTA Upgraded Version‖ holds a key strategic position. Guangdong’s economic and trade relation with ASEAN became an important research object under the Sino-ASEAN economic integration issue.Facing "One Belt and One Road" strategic opportunity, this article views Guangdong as a vital regional economy and a trade strategy executive, analyzed and evaluated the trade effect of CAFTA framework on Guangdong. This article studied the primary causes of Guangdong-ASEAN economic integration with RCA index, TCI index and TII index, which quantified export competitiveness, industrial structure and trade complementarities of both sides. According to trade data of Guangdong and its 33 major trading partners over ten 10 years, this study established Gravity Model of Trade to quantify the Trade Creation Effect and Trade Diversion Effect. The result of the above quantitative research was taken as theoretical foundation to put up economic development proposals for Guangdong’s unique interests and ―CAFTA Upgraded Version‖ national strategic goal.Based on the above studies, this paper following conclusions:Guangdong province and ASEAN countries remains strong trade complementarities(`TCI>1), particularly ASEAN is an essential resource suppliers to and electromechanical industry-based capital and technology intensive products intra-industry trade partner, which indicates Guangdong and ASEAN’s deep economic and trade cooperation has its roots in its industry structure. CAFTA framework is rather an important driving force than a decisive factor. While Guangdong and ASEAN have overlapping comparative advantage in labor-intensive industries and capital and technology intensive products, such as textile, electronics, machinery and transportation equipment industries. The gravity model lists impact factors including GDP, GDP per capita D-value, exchange rates and distance and quantifies its forces. CAFTA framework obviously facilitated trade between Guangdong and ASEAN by expanding its trade effect to 56.6%.Based on research findings, this article proposes policies to promote Guangdong-ASEAN trade. Guangdong should promote economic integration with ASEAN base on its own unique interests under national strategy, while optimizing technology-oriented industries, establishing Guangdong-ASEAN economic and trade dialogue mechanism, taking advantage of national strategies to coordinate the complimentary development of key industries for both sides and optimize its bilateral trade structure, promoting intra-industry and service trade.