New era of cooperation and growth for RCEP

[Photo by Shi Yu/China Daily]

By Liu Qing

One year since its implementation, the Regional Comprehensive Economic Partnership, the world's biggest free trade agreement, offers a timely boost to long-term growth and prosperity of the Asia-Pacific region. And as the largest economy in the RCEP and the second-biggest market in the world, China has been facilitating the integration of regional economies.

The RCEP has introduced favorable policies, such as tariff reduction, cumulative rules of origin and trade facilitation to increase regional investment and boost global economic recovery amid fears of global recession and the rising trend of de-globalization. By integrating 27 trade arrangements and 44 investment agreements signed by the 15 member states, the RCEP has optimized bilateral and multilateral investment agreements, promoted regional trade and created new investment opportunities. Regional trade has been bolstered thanks to greatly reduced costs.

According to an estimate by the Peterson Institute for International Economics, the RCEP is expected to witness a net annual increase of $519 billion in exports and $186 billion in national income of its members by 2030.

The RCEP has introduced several provisions including investment promotion and protection, trade liberalization and facilitation, and the member states have prepared negative lists to provide bigger platforms for business cooperation. Last year, most of the RCEP members achieved growth by making the most of foreign direct investment.

Also, by 2025, the RCEP is expected to help its members increase outbound investment by 2.6 percent. The RCEP has made it possible for member states to cash in on the opportunities created by and share the development dividend of China's opening-up. Ministry of Commerce data show China's trade with the other RCEP signatory countries grew 7.5 percent year-on-year to 12.95 trillion yuan ($1.88 trillion) in 2022, accounting for 30.8 percent of its total foreign trade.

While China's two-way trade with the Association of Southeast Asian Nations in 2022 reached 6.52 trillion yuan, up 15 percent year-on-year, accounting for 50.3 percent of the trade with other RCEP members, its trade with Indonesia, Singapore, Myanmar, Cambodia and Laos grew by more than 20 percent. Similarly, China's non-financial direct investment in other RCEP countries in 2022 increased 18.9 percent year-on-year to $17.96 billion, and it attracted direct investment of $23.53 billion, up 23.1 percent, from other RCEP members.

The RCEP integrates funds, resources, technologies and services to form a complete cycle of regional economic cooperation, while its members accelerated the allocation of market elements to promote institutional opening-up. The RCEP has also set unified rules to enable enterprises to make the best of their advantages, reduce trade costs and raise productivity. This will not only help expand and further stabilize the regional industry chains but also sharpen their competitive edge, expand their global influence, and help create a stronger buffer against external risks.

The RCEP Industry Cooperation Committee was established in Beijing in 2021 to promote regional investment and industrial cooperation, with the members complementing each other for boosting intra-industrial transfer, strengthening cross-border economic cooperation, promoting industrial upgrading, bolstering emerging industrial models and better matching balance supply and demand. For example, China's intermediate products trade with other RCEP member states reached 8.7 trillion yuan in 2022, an 8.5 percent increase, accounting for 67.2 percent of China's total imports from and exports to other RCEP members.

As the first FTA to have China, Japan and the Republic of Korea as founding members, the RCEP is the first truly multilateral FTA that also covers Northeast Asia. The mega deal has reduced tariffs for all the three countries and further opened up their markets for each other. As a matter of fact, the three countries have taken the lead in implementing opening-up rules. Under the RCEP framework, the three countries are cooperating to advance manufacturing of machinery, vehicle and photoelectric equipment. And sectors such as the digital economy, artificial intelligence and financial insurance also have high cooperation potential.

Besides, the RCEP has helped China and ASEAN to deepen regional economic integration. The two sides started negotiations on the 3.0 version of the ASEAN-China Free Trade Area in November, 2022, and it will focus on areas such as trade, investment, the digital economy and the green economy to build up an inclusive, modern, comprehensive and mutually beneficial ACFTA, which in turn will strengthen industrial cooperation, reduce operating costs and make industry and supply chains more resilient.

The RCEP prioritizes regional development, and urges member countries to stay committed to the principles of openness, sharing and inclusiveness, foster multi-tiered and wide-ranging cooperation, and promote higher-level opening-up to provide an important platform for countries to cooperate and benefit from each other.

However, encouraged by the rising trend of de-globalization, unilateralism and trade protectionism, some countries have been trying to build "fences and barriers" against free trade, severely disrupting industry and supply chains, heightening the risk of economic fragmentation and threatening global economic development.

In contrast, as a true multilateral FTA, the RCEP has boosted the confidence of its member states in free trade, multilateralism and regional economic integration. It has set rules to help countries at different stages of development to work together and benefit from cooperation. Indeed, the RCEP has laid a solid foundation to build an Asia-Pacific community with a shared future.

During the past year, the high-quality implementation of the RCEP enabled China to boost its institutional opening-up and promote China's application to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Digital Economic Partnership Agreement. China will remain committed to fulfilling its responsibilities as a major country, and work with other RCEP members to promote an open global economy and contribute to global development.

The author is vice-president of the China Institute of International Studies.