Leaders in South-East Asia signed a ground-breaking agreement with China yesterday that liberalises trade in services, five years after a similar pact on goods.
The agreements will help countries such as Thailand, Indonesia and Singapore to tap China’s growing economic might.

 
 
The balance of power has long been tilted in favour of their larger neighbour, which has a multibillion-pound trade deficit with a region that is feeding its relentless appetite for raw materials.

The agreements are among the most recent achievements by Asia’s answer to the European Union, the ten-member Association of South-East Asian Nations (Asean).

The body was founded 40 years ago as a bulwark against communism as war raged in Vietnam and as China was in thrall to the Red Guards and the Cultural Revolution. Today the grouping is dominated by economic concerns and it acknowledges that it needs to stay relevant in the face of China’s growing power.

Ong Keng Yong, Secretary-General of Asean, told The Times ahead of the meeting: “If we don’t pull together, we will be swallowed up by China, India and globalisation. But we can’t turn things around overnight.”

The tariff agreements with the Chinese were first proposed by China, not by Asean.Zhu Rongji, the Prime Minister at the time, sought the tie-up in 2000 to help to acclimatise his officials before China’s entry into the World Trade Organisation, according to Mr Ong.

“History will think of Zhu Rongji with a great deal of awe,” he added. “Even today, some of the Chinese leaders wonder what would have happened if he hadn’t done this.”

Trade with China was aided by the presence of diaspora Chinese in Asean, where they have dominated the business community, Mr Ong added.

This weekend, leaders of the ten nations gathered in Cebu in the Philippines and signed an agreement that will set up a free-trade zone by 2015, which could also include China. Asean said that it signed the Cebu Declaration because it “must reposition itself”. Challenges included “the major shifts in the Asian landscape brought about by the rise of China and India, and Asia’s widening links with the rest of the world”.

Mr Ong admitted that this would not be easy for Asean to achieve. “Collectively, there is some distance to go in terms of banking, finance and transparency. This is especially important because we need to move towards a freer flow of capital,” he said.

Kerry Brown, a China expert at Chatham House, the foreign affairs think-tank based in London, said that there is “very little political unity” in Asean, although members do share “general uneasiness” about China’s economic power.