17/07/2010 (The Star Online) - Having an open market is inevitable and it is now up to all chambers and trade associations from Asean and China to sit down and increase regional competitiveness.

TRADE between Asean and China continues to surge steadily, thanks in part to the China-Asean Free Trade Area (CAFTA) set up seven months ago.

According to the latest statistics by China’s General Administration of Customs, total trade with Asean reached US$136.5bil (RM436.6bil) in the first six months, 54.7% higher than in the previous corresponding period.

Malaysia’s total trade with China in the period was RM59.9bil, with exports increasing by 50% to RM33.6bil and imports seeing a 21% jump to RM26.3bil, International Trade and Industries Ministry statistics show.

Not taking things for granted, Plantation Industries and Com­modities Minister Tan Sri Bernard Dompok led a delegation of Malaysian players in the timber, palm oil and rubber industries to China last month to push for more trade and investments.

Last year, Malaysian investments in China jumped to US$247.7mil (RM792.2mil) from US$194.3mil (RM621.5mil). Chinese companies had invested in 66 projects in Malaysia with a total value of US$667.7mil (RM2.1bil) between 2006 and 2009.

Dompok said Malaysia expected palm oil exports to China to fare better this year and to surpass the four-million-tonne mark. The minister has every reason to be upbeat about the prospect given China’s strong growth.

“I think everybody is positive about the growth of China’s economy and countries with high growth rates like China contributed to the high demand for palm oil worldwide,” he said after opening the Malaysia-China Palm Oil Trade Fair and Seminar in Shanghai.

“I expect greater consumption and demand from the Chinese market. There will be no drastic changes but rather steady growth as the amount of palm oil produced is determined by the growing and harvesting period.”

Palm oil imports from Malaysia accounted for 60% of the total oils and fats in China. Malaysia was the main palm oil supplier to China with 4.03 million tonnes worth RM8.9bil last year.

While China does not permit foreign and non-state-owned soyabean crushing plants and edible oil refineries, Malaysian and Indonesian companies are allowed to operate palm oil refineries.

Malaysian companies such as PBB Group, KL Kepong and Kwantas Corp have crushing plants and refineries in Hubei, Guangdong and Sichuan provinces.

As for rubber and rubber products, Malaysia’s exports to China dropped from RM5.15bil to RM4.36bil last year, while imports from China rose by 16.6% to RM543.5mil.

Malaysia’s timber exports to China suffered badly, with a 40% drop in the past two years. Exports shrunk to RM658mil last year from RM1.1bil in 2007 because of Chinese demand for more timber goods from other countries.

“Overall, last year, China’s imports of timber increased by about 2.5% but there have been drastic changes to the types of wood purchased from different countries for processing and eventually export purposes,” said Shanghai Timber Association president Xu Wenhua.

“The government’s move to prevent a bubble in the real estate market has also contributed to the slower growth of timber imports.”

In May, International Trade and Industries Minister Datuk Seri Mustapa Mohamed said the government had rejected calls by some businesses to impose a 10% limit on Chinese imports into Malaysia following the CAFTA deal.

He said Malaysia would not backtrack on the pact adding that only a small number of products were affected by tougher Chinese competition.

Echoing Mustapa’s views, Dompok said Malaysia had much to gain from trading freely with big nations like China and would implement the tariff reduction as promised.

Under the CAFTA agreement, 93% of goods traded between the six Asean founding members and China have been zero-tariffed since the start of the year.

Tariffs for the remaining products under the normal track schedule will be eliminated by 2012 while those on sensitive products will be reduced to 20% by 2012 and subsequently to 0%-5% by 2018.

The other four Asean countries – Myanmar, Laos, Cambodia and Vietnam – will meet the tariff-less target by 2015.

China-Asean Business Council Chinese Secretariat secretary-general Xu Ningning said many chambers of commerce from Asean had expressed concern over the consequences of the tariff-less market and influx of Chinese goods.

“But we have already signed the CAFTA agreement. Having an open market is inevitable and what we can do now is for all chambers and trade associations from Asean and China to sit down and increase our regional competitiveness in the world,” he said.

Xu said, apart from trade, Asean and China had agreed on greater economic cooperation especially between small and medium enterprises, but much is needed to be done by the relevant governments to meet the targets.

“SMIs are the ones that are more worried about the impact of CAFTA. We should come up with more measures to help them integrate into, and benefit from, the free trade area,” he said.