Malaysia chaired last week (May 26, 2025), an ASEAN (ten South-East Asian nations) annual summit in Kuala Lumpur. That was followed by a trilateral summit with China and the Gulf Cooperation Council (GCC, consisting of Bahrein, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates).

What’s at stake here is a huge new free trade area with a population of 2.2 billion and a quarter of the world economy.

ASEAN and China have just upgraded their free-trade agreement, and a similar arrangement is nearing completion between China and the GCC.

China is the pillar, and most probably the main beneficiary, of this new free trading area because China is the largest trade partner to ASEAN and GCC.

In his opening statement, Malaysia’s Prime Minister Anwar Ibrahim called on ASEAN members to work together in facing the challenge of the changing global trade system. Under those new circumstances, Anwar emphasized the importance of working with “friendly partners,” pointing out the “first ever” summit with GCC and China as an example of such a policy choice.

Inclusive and peaceful Asian community

ASEAN’s trade with China stands out. In the first four months of this year the bilateral trade came in at $331.05 billion, marking a strong annual growth of 8.1%. China’s trade surplus of $81.6 billion was generated by an 11.5% increase in exports and a 3.9% growth of ASEAN sales to China.

With a nearly $1 trillion in annual bilateral trade China and ASEAN are each other’s largest trade partners. Their business ties are expected to grow and strengthen in a world where the flows of global trade and finance will follow divisions traced out by new security fault lines.

Compared to China, the Gulf countries are a much smaller trade partner to Southeast Asian economies. Last year, ASEAN-GCC trade reached $63 billion, making the Gulf the fifth-largest partner to this regional economic and political association. That’s what both sides now want to upgrade by opening the possibilities for a more liberal regime of trade and investments.

Indeed, the Gulf’s estimated direct investments of $5 billion in ASEAN are considered well below the potential in an area striving for faster economic development. It is, therefore, expected that a much bigger part of Gulf’s income from energy exports to ASEAN will be recycled in financing business projects throughout the Southeast Asia.

Strategic realignment is also an important consideration in ASEAN-GCC relations. Traditionally, Southeast Asians have followed a non-aligned status in world affairs. That position is also shared by Gulf states. As a result, both groups seem eager to maintain balanced external relations in a rapidly changing multipolar world with growing protectionism and obstacles to free trade and investments.

Strong ASEAN-China partnership

The following two examples show ASEAN’s attachment to its values, development priorities and non-aligned positions in world affairs.

At the height of one of the recurring political crises in Myanmar, an ASEAN official reported that an irate Western emissary urgently requested that Myanmar should be immediately hit with a salvo of debilitating sanctions.

The ASEAN answer the visiting emissary got was: “We don’t do sanctions.”

A similar episode occurred when the former president of Indonesia Joko Widodo took over ASEAN’s presidency in November 2022, pledging -- in the presence of the U.N. secretary general -- an “inclusive” Asian community, “a peaceful region” devoted to “economic development” and serving as an “anchor for global stability.”

How does China fit within ASEAN’s view of an “inclusive” Asian community?

The fact that ASEAN and China recently agreed to upgrade their free trade relations means that China’s surpluses are not seen as an impediment to growing business transactions. Last year, ASEAN-China trade came in at $982.34 billion, marking a 7.8% increase from 2023.

China’s contested maritime borders are only a serious political and security issue with the Philippines. Other ASEAN members apparently accept that overlapping territorial claims should be resolved in bilateral consultations, and within the Code of Conduct in the South China Sea scheduled for conclusion in 2026.

Global trade problems were the key issue discussed during the ASEAN summit and the trilateral meeting with GCC and China in Kuala Lumpur. China’s delegation was led by Premier Li Qiang, a clear signal that Beijing wants to play a key role in the consolidation of unfolding intra-Asian trade patterns.

And that also includes trade with Japan. Last Tuesday, June 3, 2025, a large Japanese political and business delegation came to Beijing to tell Qiang at the Great Hall of the People that Japan and China should “safeguard multilateralism and the free trade system.”

The G7 summit in Canada next week may wish to take note of that.