China & GCC Deepen Trade & Investment

ASEAN looks to international cooperation as China and the Gulf states join its summit for the first time.

Participation of China and the Gulf Cooperation Council (GCC) in the May 2025 summit of the Association of Southeast Asian Nations (ASEAN) was a milestone for ASEAN. The event marked the first time the Middle East and China participated in this high-level meeting of the ASEAN countries, which comprise Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

The May summit, held in Kuala Lumpur, aimed to strengthen cooperation in trade, investment, infrastructure, green energy, and the digital economy, as well as to elevate ASEAN’s global role and engender collaboration in food and energy security, sustainable development, and pandemic preparedness.

The GCC countries comprise Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. The combined GDP of the two groupings plus China, together with their hefty populations, constitutes a formidable proposition: a combined GDP around $25 trillion backed by a total population of over 2.1 billion people.

Speaking at a meeting in Singapore a few days after the summit, Malaysia’s Prime Minister Anwar Ibrahim said the purpose was to “connect ASEAN’s energy and talent with the Gulf ‘s capital and China’s scale.”

Perfect Timing

The summit’s symbolic milestone came in the face of the tariff onslaught—announced as “Liberation Day” by US President Donald Trump in early April—that has aimed at China and the ASEAN countries as its top targets. The tariff shock later gave way via negotiation to substantially reduced levies—down to 19% for Cambodia, Indonesia, Malaysia, the Philippines, and Thailand; 20% for Vietnam; and 25% for Brunei Darussalam. Myanmar and Laos face a punitive 40% tariff rate, the highest in ASEAN, while Singapore, which runs a trade deficit with the US, must pay 10%, the lowest in the grouping. On August 12, the extended the pause in its tariff hike with China by another 90 days.

The actual results of the summit do not suggest that much tangible progress was made, according to John Ashbourne, senior emerging markets economist at Fitch Solutions in London.

“We saw a lot of declarations of intent, but not a lot of real, legally binding commitments,” he says. “That said, the GCC investment into ASEAN has been rising in recent years, and we expect that this will continue. The Gulf countries’ sovereign wealth funds (SWFs) have become more active in the region, and we see significant potential for cooperation in the infrastructure-investment, digital, and green-economy initiatives.”

Ashbourne also notes that Islamic finance has great potential in the region, with Malaysia being a significant leader in the field, as more GCC firms look to get involved in the local ecosystem.

One of the summit’s tangible outcomes was the signing of an agreement for state-owned China Harbour Engineering Company (CHEC) to develop a port and industrial hub on Malaysia’s northeast coast as part of the Belt and Road Initiative (BRI). China Communications Construction Company, the world’s fourth-largest construction company by revenue and CHEC’s parent, is the main contractor for Malaysia’s East Coast Rail Link—the largest BRI project in the country—and a major contractor on other ASEAN infrastructure projects, including the China-Laos Railway.

The GCC countries’ sizable SWFs represent something of a prize—from the point of view of ASEAN and China, particularly since the SWFs have moved to a far more aggressive investing approach, including outbound M&A.

Abu Dhabi hosts three SWFs; and Kuwait, Saudi Arabia, and Qatar each have one, for a combined $4 trillion asset pool, which industry specialist Global SWF forecasts to hit almost $18 trillion by 2030. Last year, these six GCC SWFs accounted for 54% of funds deployed globally by SWFs.

The export-credit banks and agencies can also play a significant role in driving the political will of governments in ASEAN, China, and the GCC countries to execute the synergistic cooperation envisaged in the summit communiqué.

This process was already underway before the summit. Last November, the Export-Import Bank of Malaysia signed a framework agreement with the Export-Import Bank of China, which aims to facilitate trade between their countries.

Under the terms of the agreement, China Exim Bank will provide Exim Bank Malaysia with a renminbi credit line for qualified Malaysian firms to conduct business in China. The line will fund the purchase of China-produced mechanical and electronic products, equipment, hi-tech products and services, and collaboration in natural resources, energy exploration, and joint construction projects.

The framework will facilitate thirdparty market cooperation projects under China’s ambitious BRI as well as trade transactions between Malaysia and China. It prioritizes energy and infrastructure projects, particularly clean energy financing and green initiatives led by Malaysian and Chinese firms.

China’s investment in ASEAN has been steadily rising over the past decade or so. According to a 2023 report by Singapore’s DBS Bank, Chinese outward direct investment grew at a 13.5% compounded annual growth rate between 2013 and 2018, and at an 8% clip between 2018 and 2022, with BRI projects underpinning the dynamic.

But cumulative two-way investment between China and ASEAN passed $380 billion as of 2022, according to a 2023 report by HSBC while trade between the two hit $468.8 billion in 2023, an increase of 10.5% on 2022, while ASEAN overtook the EU as China’s largest trading partner in 2022.

The Trump tariffs have served to galvanize a dynamic that was already in place: the strengthening of intraregional trade in the Asia-Pacific, the increasing use of regional currencies for settlement therein, and the alignment of cross-border payment systems.

“Although the tariffs initially caused disruptions and exposed vulnerabilities, they also unintentionally accelerated ASEAN’s move toward closer intraregional connections and economic partnerships,” observes Poppy Winanti, professor of international relations on the Faculty of Social and Political Sciences at Universitas Gadjah Mada, Indonesia.

“In the long term, these strategies point to a more resilient and interconnected ASEAN that relies less on a single trade partner and plays a bigger role in future global trade trends,” she says.

At the same time, Carmelo Ferlito, CEO of the Center for Market Education, a think tank based in Kuala Lumpur, has mixed feelings regarding the proposal.

“On one hand, I understand the appropriate need for diversification in terms of trade and [foreign direct investment],” he says. “On the other hand, it must be recognized that China and the Gulf countries have a very different relative weight in the relationship with ASEAN. While China is a dominant player in terms of external trade and investments, Gulf countries still play a limited role.”

Debt Collaboration

One area in which the three can cooperate unambiguously is the debt markets, in bond and loan formats. Syndicated loans originated in ASEAN increasingly feature Chinese and GCC banks at the top level, and in the sell down and ASEANoriginated primary bond market, roadshows visit the large Chinese and GCC financial centers as common practice.

China could soon unleash up to $139 billion on ASEAN’s local-currency bond markets if a proposal made in July by Chinese regulators to expand the “southbound leg” of China’s Bond Connect channel—which enables institutions on the Chinese mainland to access Hong Kong’s bond market—comes to fruition.

“We remain positive on the long-term potential of ASEAN for businesses, underpinned by strong fundamentals, including its young population, rising middle class, and strong infrastructure connected to trade,” says Koh Chin Chin, head of group treasury, research, and customer advocacy, at United Overseas Bank (UOB) in Singapore. “There are pockets of opportunities and areas of potential cooperation arising from several trends, such as the diversification of trade partners and rising intra-ASEAN trade. In terms of UOB’s funding strategy, we recognized early on the importance of the Panda bond market [issuance by foreign entities in onshore renminbi] as China continues to liberalize the renminbi and its financial markets.”

UOB has also seen growing appetite from GCC investors for conventional bond issuance, she adds.

In all this, perhaps optimism is called for: “ASEAN is often seen as a neutral broker; it can bring together countries or groups that might otherwise not have close relations,” says Fitch Solutions’ Ashbourne. “So, in some ways, it is the perfect partner to bring leaders from the GCC and China together in the same room. This could, absolutely, be the beginning of something big.”