On October 28, 2025, the China-ASEAN Free Trade Area (CAFTA) entered a new phase of economic cooperation with the signing of the Version 3.0 Upgrade Protocol in Kuala Lumpur, Malaysia. The agreement, witnessed by Premier Li Qiang, Malaysian Prime Minister Anwar Ibrahim, and other ASEAN leaders, was signed by China’s Minister of Commerce Wang Wentao and Malaysia’s Minister of Investment, Trade and Industry Tengku Zafrul. This milestone agreement deepens economic and trade integration between China and ASEAN, further advancing regional cooperation under a modernized and forward-looking framework.
Strategic Significance of the Protocol
The new Protocol represents a landmark step in strengthening economic and trade relations between China and ASEAN, each other’s largest trading partners. It is an outcome of the consensus reached between Chinese and ASEAN leaders to advance regional cooperation and promote a more open and inclusive trade environment. The agreement underscores both sides’ commitment to multilateralism and free trade at a time when global economic systems face uncertainty due to protectionist measures in some regions.
Beyond reaffirming shared support for a rules-based international trade system, the Protocol sets a new benchmark for regional economic integration. It expands cooperation beyond traditional trade and investment to include emerging sectors such as the digital and green economies, standards alignment, and supply chain connectivity. This broad approach strengthens the foundation for building a China-ASEAN community with a shared future, promoting peace, prosperity, and mutual benefit.
Background and Negotiation Process
The China-ASEAN Free Trade Area was the first free trade agreement negotiated by both parties with external partners. Initiated in 2002, the CAFTA Version 1.0 was fully implemented in 2010, followed by an upgrade to Version 2.0 in 2015, which came into effect in 2019. Over the years, bilateral trade has expanded significantly, rising to nearly USD 1 trillion in 2024, a seventeen-fold increase since the early 2000s.
The idea for Version 3.0 was introduced by President Xi Jinping in 2021 during the 30th anniversary of China-ASEAN dialogue relations. Formal negotiations began in November 2022 and involved nine rounds of discussions and over 120 working group meetings. Following the substantive conclusion of negotiations in 2024, both sides finalized the legal and technical details in 2025. The official signing during the 28th China-ASEAN Leaders’ Meeting marked the successful conclusion of the multi-year process.
Key Features of the Version 3.0 Protocol
The upgraded Protocol builds upon CAFTA Versions 1.0 and 2.0 and the Regional Comprehensive Economic Partnership (RCEP). It incorporates international high-standard trade rules and addresses new economic realities. Three features distinguish this version: expansion into emerging fields, enhanced openness, and a strong focus on inclusive development.
Version 3.0 introduces new areas of cooperation, including the digital and green economies, supply chain connectivity, competition and consumer protection, and support for small and medium-sized enterprises (SMEs). These additions reflect a shared determination to lead international rulemaking in emerging sectors. The Protocol also deepens liberalization commitments across goods, services, and investment, while establishing comprehensive institutional frameworks to support cooperation. Furthermore, by integrating measures that protect consumers, promote fair competition, and support smaller businesses, the agreement seeks to ensure that regional growth is both inclusive and sustainable.
Core Areas of Cooperation
The Version 3.0 Protocol encompasses nine major areas of cooperation, expanding the scope of previous agreements and introducing mechanisms to enhance economic resilience.
In the digital economy, the Protocol establishes advanced regulatory frameworks covering cross-border data flows, cybersecurity, electronic authentication, and digital trade facilitation. These measures aim to create a secure, interconnected environment conducive to digital transformation and innovation.
The green economy section emphasizes sustainable development and environmental cooperation. It introduces clear definitions and commitments to green investment, clean energy, and sustainable finance, while ensuring environmental standards do not become tools for trade protectionism. The collaboration will support a transition toward a circular economy and promote green technology across the region.
The supply chain connectivity chapter—an unprecedented addition to CAFTA—focuses on building resilient, efficient, and digitally integrated supply chains. The two sides will work together to enhance multimodal transport, improve logistics infrastructure, and strengthen regional supply chain risk management mechanisms.
In standards and technical regulations, the Protocol promotes the mutual recognition of conformity assessments and the alignment of industrial standards, particularly in emerging sectors such as new energy vehicles and electronics. This will help reduce technical barriers and facilitate market access across the region.
Additional chapters cover sanitary and phytosanitary measures, customs procedures and trade facilitation, competition and consumer protection, and support for SMEs. Each aims to simplify trade processes, enhance transparency, and improve regulatory cooperation. A separate section on economic and technical cooperation establishes frameworks to support capacity building, especially for least developed ASEAN members, ensuring balanced and inclusive regional development.
Path to Implementation
Following the signing ceremony, both China and ASEAN member states will carry out domestic approval procedures to bring the Protocol into force. Once ratified, the agreement will be published on the China Free Trade Zone Service Network for public access. Its implementation is expected to enhance connectivity, drive sustainable growth, and strengthen the economic interdependence that underpins the stability of the broader Asia-Pacific region.
Outlook for Regional Economic Integration
The China-ASEAN Free Trade Area Version 3.0 marks a pivotal advancement in Asia’s regional economic architecture. By aligning policy priorities in digitalization, sustainability, and supply chain resilience, the agreement responds to contemporary economic challenges while laying the foundation for long-term growth. As both sides accelerate implementation, the Protocol is expected to deepen mutual trust, enhance competitiveness, and solidify the China-ASEAN partnership as a cornerstone of open and inclusive regional development.