RCEP’s synergy with China’s economic strategy bodes well for Asia-Pacific
- China’s plans to boost consumption will make it the RECP’s main import magnet, catalysing regional integration, even as RCEP membership opens doors to more trade deals for a reforming China
In “international circulation” – foreign trade and investment – the RCEP’s common rules of origin will make cross-border trade simpler and cheaper, allowing Chinese firms to optimise resource allocation between the domestic market and the rest of the region. RCEP membership will also anchor higher value-added growth points in China as multinationals shift some production processes to elsewhere in Asia due to rising mainland costs and a desire to insulate supply chains from trade frictions.
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Just as importantly, the RCEP aligns with another core thrust of China’s dual circulation strategy: boosting domestic consumption.
Earlier this month, President Xi Jinping projected that China would import US$22 trillion of goods in the next decade. Firms, workers and farmers in RCEP economies are well-placed to tap this bounty.
Over time, cross-border trade and investment will expand the synergies between China’s dual circulation strategy and the RCEP, reinforcing the pact’s cohesion and viability as a vehicle for deeper regional integration. Like fine wine, Asean agreements tend to improve with time.
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For China, the RCEP could be a stepping stone for more trade agreements, as the Asia-Pacific becomes a coherent trading zone like Europe or North America, albeit on a grander scale.
Previously, some voices at home had raised doubts over China joining the RCEP, let alone the less flexible CPTPP, seen as a forerunner of even higher-standard trade agreements. Success in the RCEP will help quell this domestic opposition while reforms take China’s economy closer to CPTPP rules on issues such as intellectual property, market access and foreign investment.
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The two regional agreements are by no means mutually exclusive – seven countries are members of both. In fact, they could form complementary tracks to regional integration: the rigorous CPTPP for more advanced economies and the less-demanding RCEP for developing Asian countries. And China could eventually help to bridge the two projects – under the Free Trade Area of the Asia-Pacific or some other mechanism.
Wang Huiyao is the founder of the Centre for China and Globalisation, a Beijing-based non-governmental think tank