FTAs with South Asian nations will boost trade, offer new avenues for cooperation

China has just concluded negotiations on a free trade agreement (FTA) with a second South Asian country, a sign of its expanding trade activity in the region.

On Saturday, China and the Maldives signed a memorandum of understanding on an FTA after five rounds of talks and one ministerial consultation, according to an announcement on the website of China’s Ministry of Commerce. Under the agreement, more than 95 percent of bilateral merchandise trade will be exempt from tariffs, and both governments will strive to open their markets in such areas as finance, medicine and tourism and strengthen pragmatic cooperation in key areas.

The Maldives becomes the second South Asian country after Pakistan to reach a free trade pact with China. Negotiations on an FTA between China and Sri Lanka, another South Asian country, are still in progress, with five rounds of talks held so far. Also, China and Nepal started a feasibility study for a free trade deal in March 2016, according to media reports.

Thus, four of the eight South Asian countries have either reached or are working on FTAs with China, indicating the deepening trade ties China is seeking in the region.

As South Asia is an important part of the Belt and Road (B&R) initiative, which promotes trade connectivity, FTA negotiations with regional countries could help shape the new trade order and rules among B&R countries. Bilateral trade and investment levels between China and South Asian countries have been relatively low, so FTAs will pave the way for more trade and new forms of cooperation.

As expanding trade meets the common needs of China and South Asian countries, it may also have a positive impact on the largest South Asian country – India – which may better understand and recognize the importance of the B&R to economic development and trade cooperation in the South Asian region.

FTA negotiations with South Asian countries are not aimed at containing any third party and there is no need to be oversensitive about this trend. If anything, China and B&R countries and regions are just trying to promote cooperation with new trade rules.