INTRODUCTION

There are certainly some risks and costs associated with the current initiatives to bring about greater trade liberalization between China and the ASEAN countries within the framework of the WTO and regionalism. But the high level of commitment demonstrated by both parties for the establishment of a free trade area indicates their sense of optimism that the enormous benefits that can be derived from free trade will outweigh the short-term costs.

It is argued that China and the ASEAN countries can maximize the benefits of trade liberalization by strengthening and enhancing their investment cooperation. Both countries have huge markets (existing and potential) which offer each other enormous investment opportunities.

Investment cooperation can take a variety of forms but may be classified into two types: market sharing and resource pooling. Market sharing takes the form of providing access to each other's investment opportunities by relaxing the restrictions and rules on and creating an environment conducive for foreign investments. Resource pooling could take the form of joint ventures and other types of partnerships (such as joint marketing and promotion) using each other's comparative advantages and complementarities.

In this light, this chapter will attempt to identify the specific areas where there is great potential for investment cooperation between these countries and the obstacles that need to be addressed in order to bring this potential into reality.

The first part of the chapter will first outline the trends and nature of the investment relationship between these countries. The second section will identify the specific areas where there is potential for mutually beneficial investment cooperation between these countries and the third section discusses the major obstacles and constraints that have come in the way of achieving a significant ASEAN-China investment cooperation.

ASEAN-CHINA BILATERAL INVESTMENT

Before exploring and identifying areas for possible investment cooperation, it is useful to first briefly outline the trends and nature of the investment relationship between China and the ASEAN countries.