With the RCEP, China finally has a seat at the trade and policy table
- As the dominant economy in the world’s largest trading bloc, China finally has institutional voice and a chance to establish its preferred rules and standards
It’s necessary to view the wider picture around the RCEP launch to understand how this “detail” fits into China’s overall designs. And that means looking back at events over the past decade or more, especially over the past five years.
The US was for long the “top dog” not only in terms of economic size but also in terms of institutional clout, and thus, a regional and international standards setter. The privilege this role confers is potentially enormous, yet perhaps not sufficiently well understood.
The US has also exerted effective control over the world’s leading multilateral institutions (many of which it was instrumental in creating) including the Bretton Woods twins – the International Monetary Fund and the World Bank – regional development banks such as the Asian Development Bank, plus the World Trade Organisation, World Health Organisation and so on.
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What was not widely appreciated at that time was the role that the AIIB was envisaged to play in giving China presence and “voice” in international financial affairs, as professor of economics Xing Yuqing at the National Graduate Institute of Policy Studies in Tokyo put it.
The AIIB has since maintained quite a low profile while seeking to build a reputation for sound management. Yet its status as an international financial institution gives it standing and enables it to attract foreign talent that will further aid China’s emergence in international financial policymaking.
It could help China build an IMF-like institution later, which would further transfer policymaking initiatives from Washington to Asia.
Will Asian economic integration take root under China’s AIIB?
US ability to dictate regional trade rules for the Asia-Pacific appeared to be firmly cemented at the start of 2016 when the Trans-Pacific Partnership (TPP) was formally signed under former president Barack Obama. China’s aim to gain greater influence appeared to have been thwarted.
That strategy has paid off, partly thanks to Trump’s short-sighted impetuousness, but really because Beijing was right in understanding that Asia was not ready (let alone desirous of) a TPP-type deal which required strict conformity with US-style market-economy ideology.
RCEP signing shows Asian nations taking their place in world order
Likewise, China was right in thinking when it launched the AIIB that many Asian countries were no longer enamoured of the many policy prescriptions and prohibitions that came as a condition of borrowing from the World Bank and similar regional development banks that exist within the UN system.
As Hung Tran, a non-resident senior fellow at the Atlantic Council think tank in Washington observes: “The RCEP’s main winner will be China, which has secured a dominant position in one of the world’s most dynamic economic regions, giving Beijing the opportunity to establish its preferred rules and standards, and providing a major advantage for its companies to exploit these valuable markets.
“The United States, on the other hand, sets to lose out from sitting on the sidelines, as its attempts to reshore US manufacturing and promote Western-backed trade rules could be dented by the new trade agreement.”
That encapsulates the situation rather well.
Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs
