Congratulations may have poured into Beijing from its Southeast Asian neighbours in recent days following the passing of a landmark United States bill granting permanent trade privileges to the mainland. However, privately some see it as a double-edged sword. On the upside, warming economic relations between two of the world's superpowers should be good for peace and prosperity in the Pacific. 'Better jaw-jaw than war-war,' said Singapore trade minister George Yeo Yong Boon, quoting Britain's wartime prime minister Winston Churchill, on hearing the news. Mainland liberalisation should also provide new investment opportunities on the mainland for Southeast Asian firms, as it edges towards entering the World Trade Organisation. On the downside, there are fears the mainland's huge potential, cheap labour and appetite for capital could prove over-bearing. Its southern neighbours are concerned it could monopolise foreign investment that might otherwise have been destined for the 10 members of the Association of Southeast Asian Nations (Asean). 'It will become a major competitor for the Asean countries,' Thai Prime Minister Chuan Leekpai's economic adviser Arporn Chewakriengkrai has warned. 'China can competitively produce vehicles and parts, computer products, electronic goods and telecommunications equipment.' Aside from bringing down trade barriers, the mainland will also deregulate and modernise its economy as its enters the WTO and embraces the global capitalist system. Winning permanent normal trade relations (PNTR) status with the US was one of the last hurdles for Beijing to cross before gaining WTO accession. Beijing's bid for WTO membership, for example, will require it to cut its average tariff rates on farm products from 41.9 per cent to 16.9 per cent. Its tax on manufacturing products will fall from 25.9 per cent to 11.8 per cent. It will also be required to cut export subsidies, a move that will make its exports less competitive, at least in the short-term. All this may sound like good news to Southeast Asian exporters. But, at the same time, Asean policy-makers are concerned about the possible erosion of the region's comparative competitiveness and attractiveness as a foreign investment hub. 'In a number of sectors, Southeast Asian economies will compete with China for the same investment,' said Mr Yeo. 'There is a greater need than ever for economic integration in Asean.' This year, Asean finance ministers identified the mainland's WTO entry as one of the greatest threats to Asean's stability and prosperity, along with turmoil in Indonesia and the US stock-market bubble. Asean countries have a combined population of about 500 million, compared with the mainland's 1.2 billion - more than double the potential consumer pool. On the manufacturing front, mainlanders have a per capita income of only US$700 a year, or half that of Asean's, making for a cheaper labour force. Asean officials believe their best chance of competing with the mainland is by sticking together. In recent months, joint investment roadshows have been staged to Japan, Europe and the US, selling Asean as a region. Meanwhile, efforts are being made to accelerate the implementation of such collective initiatives as the Asean Free Trade Area (Afta), Asean Investment Area, and Asean Industrial Co-operation Scheme. Under Afta, Asean's biggest initiative, six of its 10 members have agreed to cut tariffs on a list of manufactured and agricultural products to between zero and 5 per cent by 2002. Asean has also called for PNTR status with the US for all its members to allow them to compete on a even footing. During a Asean-US dialogue last week, Malaysian Foreign Ministry Secretary-General Abdul Kadir Mohamed said: 'Malaysia wishes to highlight once again the absence of development co-operation programmes in the US-Asean dialogue relations and the fact that the US still does not have normal trade relations with some Asean member countries.' Vietnam, the former US wartime enemy, is the main exception.