RCEP membership would make HK the ‘superconnector’ of Asia
Says joining trade bloc would strengthen city’s integration and capacity for innovation and economic growth
‘It’s in our DNA to pursue opportunities, to seek collaboration and mutually rewarding economic development,” said John Lee Ka-chiu, Hong Kong’s chief executive, during the 29th Asia-Pacific Economic Cooperation (APEC) economic leaders’ meeting, held recently in Bangkok. This was in the context of his push for Hong Kong’s early accession to the Regional Comprehensive Economic Partnership (RCEP), which is the world’s largest free trade deal. It includes 15 Asian-Pacific countries, including the 10 Association of Southeast Asian Nations (ASEAN) countries.
Hong Kong applied to join the RCEP in mid-January this year, and its application is expected to be settled within 18 months from that date. RCEP members are major trading partners of Hong Kong, constituting over 70 percent of the city’s total merchandise trade in 2021. Hong Kong has signed free trade agreements (FTAs) with more than half of APEC’s members, so membership in the RCEP would simplify Hong Kong’s trade relations by joining various bilateral FTAs into one common framework. I strongly support Hong Kong’s entry into the RCEP. It would be highly beneficial to Hong Kong’s economic development and further consolidate Hong Kong’s status as an international center for financial, legal and other professional services.
Hong Kong’s entry into the RCEP would strengthen the city’s regional economic integration, innovation and economic growth. It entails greater market access, tariff reductions, and removal of nontariff trade barriers, which would bolster Hong Kong’s trade and investment ties with other RCEP members. This would cut costs and increase the competitiveness of Hong Kong’s companies, enabling their
expansion into markets across the region. For example, the RCEP could enable Hong Kong’s reindustrialization by allowing Hong Kong’s businesses to reallocate supply chains into emerging economies in Southeast Asia. Additionally, Hong Kong currently does not have bilateral trade agreements with Japan and South Korea. However, by joining the RCEP, opportunities for greater cooperation with their high-tech sectors would likely arise, contributing to Hong Kong’s innovation and technological development.
The RCEP would also help minimize Hong Kong’s exposure to risks from current geopolitical conflict and economic uncertainties. The decoupling of supply chains between the US and China and sluggish global economic growth threaten to undermine Hong Kong’s traditional role as an intermediary between the Chinese mainland and the West. Yet the RCEP, which promotes supply chain resilience and more robust economic and trade cooperation across the region, would reduce Hong Kong’s vulnerabilities and reliance on the West. Hong Kong and the mainland should take advantage of the RCEP — it is representative of the construction of greater regional multilateralism in East Asia and the United States’ declining hegemony in the region.
Moreover, the RCEP supports the consolidation of Hong Kong’s role as a regional “superconnector” in capital and talent exchange, and a high-value-added service provider. The RCEP would attract companies from its members to invest in the city and use its professional services, and increase Hong Kong’s appeal to overseas talent to relocate to the city. It would build upon existing government initiatives, such as the recent establishment of a CoInvestment Fund of HK$30 billion ($3.85 billion) to boost Hong Kong’s competitiveness for overseas businesses, investment and talent.
Additionally, the RCEP would further accelerate the renminbi’s internationalization, increasing China’s regional influence and buttressing Hong Kong’s role as a global center for offshore RMB business. Hong Kong processed over 5.7 trillion yuan ($807 billion) worth of RMB trade settlements in the first 11 months of 2020, an increase of 20 percent compared with the same period in 2019. The RCEP would support its further growth and promote the use of RMB across the region, likely at the expense of the US dollar.
All in all, there is a multitude of benefits to joining the RCEP for Hong Kong, so I would strongly advocate for Hong Kong’s membership and urge others to do so as well. Joining the RCEP would strengthen Hong Kong’s regional integration and capacity for innovation and economic growth, which would in turn help minimize Hong Kong’s vulnerabilities to rising “superpower conflict” and economic uncertainties. This would help consolidate Hong Kong’s role as a regional “superconnector” and signal to the world that Hong Kong is back to center stage.