The Free Trade Area (FTA) agreement between the Association of Southeast Asia Nations (ASEAN) and China, which took effect on Jan. 1, 2010, will provide mutual benefit, an ASEAN official told Xinhua in a recent exclusive interview.

Sundram Pushpanathan, deputy ASEAN Secretary-General for ASEAN Economic Community, said that China is increasingly becoming a global economic powerhouse and ASEAN can benefit from it.

"But similarly, China can also take advantage of the stronger economic prospects in the ASEAN region, especially since it is now moving towards an integrated ASEAN Economic Community," he said.

He said that the agreement is aimed at promoting trade between the two by reducing the tariff barriers.

"This agreement provides huge opportunities for ASEAN domestic producers to enter the lucrative Chinese market with its increasingly strong purchasing power," he said.

According to Pushpanathan, ASEAN exporters and producers will be encouraged to improve their productivity and efficiency to compete with their Chinese counterparts.

Therefore, he added, ASEAN governments must work closely with the private sector to ensure that the FTA agreement can be beneficial for them.

He also said that ASEAN's growing importance as a region cannot be underestimated, and for sure, its economic development is going to influence its neighbors, including China.

"I think this influence will also be triggered by the process of economic integration. As ASEAN strives to be competitive and increasingly more integrated, the opening-up of markets is likely to lead to greater policy coordination and cooperation among countries within and outside the region," he said.

Pushpanathan said that with strong growth prospects this year, ASEAN is likely to attract more Chinese enterprises to relocate their foreign investments in the region.

Currently, he said, China is a large provider of foreign direct investment (FDI) to the emerging market world.

He said that Chinese FDI to ASEAN is influenced by close proximity between China and ASEAN, better political stability, existence of market reforms, and overall positive growth prospects in the region.

"FDI from China to ASEAN has shown steady growth between 2005 ( 608 million U.S. dollars) and 2008 (2.1 billion dollars) before falling in 2009 due to the crisis. Recovery of the global economy is expected to result in positive growth in FDI inflows this year and next year," he said

He added that according to a research by the Multilateral Investment Guarantee Agency (MIGA) last year, multinational enterprises in developing economies have been the primary engine of this trend.

Since 2000, the share of FDI flows from emerging markets to global flows has increased from 1.4 percent to 10.8 percent in 2008.

The BRICs (Brazil, Russia, India and China) accounted for 64 percent of these flows during that period, with China taking in 53. 5 billion dollars inflows in 2008.