The rise of China’s economy in the last couple of decades can be attributed to the favorable initial conditions, the market-oriented economic reforms, and good macroeconomic management in the nineties. As China continues to struggle with the problems of its SOEs, its trade and investment volumes have grown at unprecedented rates making China a major global economic player. Contrary to expectations based on traditional trade theories, the study found that overall, China’s economic growth has not been a competing force in the region but instead has provided a synergy for greater growth in the region. Between 1975 and 1990, all the ASEAN nations have established diplomatic ties with China and since then have developed favorable political relations so as to give economic relations full opportunities to develop from extremely low levels in the seventies. The growth of the ASEAN economies and their total trade volumes increased rapidly since China opened up to the outside world. Bilateral trade with China increased even more sharply although shares remain small. In particular, exports to China have increased faster than imports from China. With respect to direct foreign investments, China’s growing economy has made the East Asian region a focus for investors. The project also found that while in the past decades it was the general political relations between China and the ASEAN nations that set the conditions for bilateral economic cooperation, more recently, with China’s economy becoming more market oriented, most bilateral trade and investment decisions have been based on profitability considerations.
