China seeks to wrap up trade pact talks with Asia neighbors

China hopes to finish negotiations on upgrading a free trade zone with ASEAN member states and another trade pact involving the ASEAN and five other economies in the Asia-Pacific region, according to a government work report delivered by Premier Li Keqiang on Thursday.[Special coverage]

China has sought strengthened trade relations with ASEAN (Association of Southeast Asian Nations) members, as well as with India, Japan, the Republic of Korea (ROK) and Australia in recent years.

China opened its first free trade area with ASEAN in January 2010 and is now working on an upgrade to boost trade. The world's second largest economy aims to wrap up talks for the Regional Comprehensive Economic Partnership (RCEP), which aims to integrate trade relations ASEAN already has with China, Japan, ROK, India, Australia and New Zealand, respectively.

Trade with the ten ASEAN economies accounts for 11.16 percent of China's total trade, reaching 480.4 billion U.S. dollars last year. The talks to crank up the free trade agreements, now in the second round, focus on more measures to open markets and facilitate trade of goods, service and mutual investment.

Rising labor costs are undercutting China's edge in low-end manufacturing and enhanced trade pacts with regional partners will expand new markets for China as it struggles to move manufacturing up in the global industrial chain, said Zha Daojiong, a professor with the School of International Studies at Peking University.

China also sees enhancing the existing free trade pact with ASEAN as a foundation for building RCEP along with the five other economies. China's pledge so far includes less restrictions for ASEAN investment into China, though details have yet to be worked out in negotiation, and 30 million yuan in the next three years for economic and technology cooperation.

The RCEP, which brings together 16 economies, will have an export volume of 5 trillion dollars, accounting for 28 percent of the world's total.

According to Zha, the RCEP has greater potential to facilitate trade among economies in the region than the Trans-Pacific Partnership (TPP), another trade pact also under negotiation with the United States, Canada, Japan and several other countries in southeast Asia and south America.

Zha said the regional pacts China is pursuing should not be seen as weakening the influence of TPP.

Thursday's government work report also lays out China's ambition to achieve substantial progress in free trade agreements with regional partners ranging from the ROK and Australia to Israel and Gulf nations as part of its effort to build a "a new level of comprehensive opening to the outside world".

Last year, Chinese leaders proposed strengthening economic relationships with its neighbors in central Asia along the ancient trade route known as the Silk Road and deepen trade with south Asia through what authorities calls the 21st Century Maritime Silk Road.

China has also committed a 40 billion dollar fund to provide financial support for infrastructure construction and economic cooperation along the Silk Road Economic Belt. More than 20 countries have expressed willingness to sign up for the Asia Infrastructure Investment Bank, proposed by China as an alternative source of funds to established regional lenders.

These regional trade pacts will add to the Chinese leaders' vision for the "Belt and Road" initiatives. It is also in the interest of economies running trade deficit with China to sign trade agreements, making it easier to trade and invest in China, said Lei Zhuning, deputy director of Yunnan Academy of South East Asian and South Asian Studies.

China has benefitted from regional cooperation and is also its strong advocate, Chinese President Xi Jinping said in November during the APEC summit held in Beijing.