Opinion | RCEP’s synergy with China’s economic strategy bodes well for Asia-Pacific

After eight years of tough negotiations, November 15 saw a breakthrough for regional cooperation as 15 Asia-Pacific nations signed the biggest free-trade deal in history. Comprising the 10 Asean members, Australia, China, Japan, New Zealand and South Korea, the Regional Comprehensive Economic Partnership (RCEP) will reduce trade barriers across a third of the world’s population and economic output area. Economists at Johns Hopkins University estimate the pact could add US$186 billion to the global economy – a welcome boost as we face the worst recession in a century.

Perhaps more significantly, the RCEP will catalyse Asia’s long-term integration and is a major milestone in the opening up of China, providing a foundation for membership in more advanced trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

In its 14th five-year plan (2021-2025), China must adapt to a post-pandemic world shaped by economic uncertainty and the splintering of global value chains. As China’s first multilateral trade deal – and the first to include Japan and South Korea – the RCEP, which will remove around 90 per cent of tariffs eventually, meshes powerfully with China’s dual circulation strategy, which aims to boost self-sufficiency while diversifying integration into global markets.

Links between China and RCEP supply-chain partners such as Vietnam and Malaysia are already deepening in sectors such as electronic manufacturing. China’s imports of integrated circuits from the Association of Southeast Asian Nations grew by 23.8 per cent in the first half of this year, while its exports of the same to Asean grew 29.1 per cent. Asean has surpassed the European Union to become China’s largest trading partner.