GUANGZHOU: South China's Guangdong Province, which accounts for 31 per cent of China's foreign trade, aims to spruce growth in its trade with the Association of Southeast Asian Nations (ASEAN) above the national average by 2010.

Guangdong also hopes for an above-average weight of direct investment from ASEAN in its foreign direct investment (FDI) portfolio and a more than 20 per cent annual increase in the number of local firms investing in ASEAN.

Liang Yaowen, director of the provincial department of foreign trade and economic co-operation, made the remarks at a seminar on Guangdong-ASEAN economic co-operation held in the provincial capital Guangzhou yesterday. ASEAN is comprised of 10 member countries.

The China-ASEAN Free Trade Area (FTA), the building of which is scheduled to be completed by 2010, is expected to bring important opportunities to Guangdong, Liang said.

Guangdong enjoys immense potential in its export of products such as machinery, electronics, textiles, garments and other light industrial products to ASEAN and its efforts to enhance its manufacturing capacity will call for increasing imports of resources and electronic parts and components from the association.

Cuts in tariffs and trade facilitating measures resulting from the China-ASEAN FTA are set to help expand two-way trade, Liang said.

Import and export between Guangdong and ASEAN, Guangdong's fifth largest trading partner, went up by 20.8 per cent year-on-year to US$25.91 billion in the first 10 months of this year, according to the customs.

The growth is, however, significantly lower than that of China-ASEAN trade, which was 35 per cent during the period. China-ASEAN trade stood at US$84.6 billion. Exports of Guangdong products to ASEAN accounted for 4.8 per cent of the province's total exports and 1.9 per cent of total imports of ASEAN last year.

Goods flowing from Guangdong into ASEAN are dominated by original equipment manufacturing (OEM) products, which refer to those contractedly made but without their own brands. Firms with their own brands have yet to boost their efforts to explore the ASEAN market, Liang said.

Guangdong-ASEAN trade has also seen huge deficits incurred onto Guangdong. Guangdong suffered a deficit of US$11.55 billion in its trade with ASEAN in the first 10 months of this year, accounting for 67 per cent of China's trade deficit against ASEAN.

About 57 per cent of the deficit came from the processing trade within the province, especially processing of machinery and electronic products. The trade features ASEAN's supply of parts and components, processing in Guangdong and sales of final products in developed economies, meaning Guangdong is earning a thin margin in the whole process.

Import of resources and raw materials also make a big proportion of the deficit.

Along with the opportunities, competition is also expected to intensify with the building of the China-ASEAN FTA.

A report from the provincial foreign trade department suggests Guangdong move up along the value chain, enhance brand building, diversify export markets within ASEAN and foster bigger play of private local firms in exporting.

Meanwhile, FDI from ASEAN reached US$4.74 billion at the end of last year, accounting for 3.38 per cent of the total FDI into the province. The weight is lower than the 6.46 per cent ASEAN contributed to China's total FDI.

(China Daily 12/29/2004 page9)