China, ASEAN spark up energy cooperation

China and the Association of Southeast Asian Nations (ASEAN) are looking forward to more cooperation on energy matters with a new preferential policy now making its effect felt.

In late October, China signed a "certificate of origin" for electricity sold to Vietnam. A certificate of origin, known as FORM-E, is an instrument of the China-ASEAN Free Trade Area (FTA). Governments use it to allow commodities from the signing country to enjoy preferential handling in the recipient nation.

This is the first time China has made use of the system for a electricity transaction, and the deal will be exempt from the one percent tariff that Vietnam customarily imposes on imported electricity. A total of 5.6 million kilowatt-hours are involved , which means a saving of about 3,420 U.S. dollars in tariffs for Guangxi Grid, a subsidiary of China Southern Power Grid.

Guangxi Grid already has plans to export more electricity to Vietnam and is building the means to transmit power to other ASEAN countries including Thailand, Laos and Myanmar.

China and ASEAN have now ushered in the zero-tariff era in energy cooperation. This is bound to give a lift to other areas of cooperation, according to Zheng Weikuan, an economist at Guangxi University for Nationalities.

"China and ASEAN have extended mutual preferential policies under the FTA framework to energy rather than just general commodities," he said.

Fu Shuaixiong, from Peking University, said that although the amount saved is not huge, the move is an important signal of intent in the transformation of the FTA.

"The signing of the certificate means China and ASEAN are moving away from a mechanism based exclusively on commodities and looking toward services," Fu said.

Fu added that it will help unlock the energy sector in China and ASEAN, leading to more cooperation in the future.