Boosting the RCEP dividends
Hong Kong bid to join regional trade pact spells good news for businesses, apart from other gains
In his keynote speech at the Greater Bay Area Conference on Nov 22, Hong Kong Chief Executive John Lee Ka-chiu thanked member countries of the Association of Southeast Asian Nations (ASEAN) for their support of Hong Kong’s bid for accession to the Regional Comprehensive Economic Partnership (RCEP) trade pact.
It is vital to appreciate that the Hong Kong Special Administrative Region’s accession would help to accelerate momentous opportunities for businesses, people and geopolitics.
The RCEP, which took effect in January 2022 and comprises the 10 ASEAN member states, the Chinese mainland, Japan, the Republic of Korea, Australia and New Zealand, is the world’s largest free trade agreement, representing a third of global GDP and a third of the world’s population. Ninety percent of tariffs on imports among its members are expected to be eliminated. Common rules for e-commerce, customs procedures and intellectual property will be established, facilitating trade flow by reducing costs and barriers.
The RCEP will synergize with the Belt and Road Initiative’s six economic corridors: the New Eurasia Land Bridge and the China-MongoliaRussia, China-Central Asia-West Asia, China-Indochina Peninsula, ChinaPakistan and Bangladesh-ChinaIndia-Myanmar economic corridors.
Deepened regional connectivity on multiple fronts with nations of different cultures, civilizations and political ideologies will serve to mitigate, if not eliminate, ungrounded rhetoric of “de-risking” from China.
The RCEP has the world’s largest middle-income population, including that of China, which is expected to grow to 1.2 billion consumers by 2027. With diverse cultures such as those of Japan, the ROK, Australia and New Zealand, the RCEP opens up new opportunities for high-quality, innovative and sophisticated products and services.
China has been the world’s largest and fastest-growing producer of renewable energy for more than a decade, widening its lead in solar and wind power capacity in recent years. Also, helped by a large Tesla facility, China has become the “New Detroit” for electric vehicles, making and selling 6.8 million EVs in 2022 alone, compared with 800,000 in the United States.
The rest of the RCEP countries are also embracing the “green revolution” with alacrity, spawning a new era of green finance, products, services and lifestyles. The revolution is beginning to take root in Hong Kong, the Guangdong-Hong Kong-Macao Greater Bay Area and the RCEP socioeconomic ecosystem, creating many green-business and cross-cultural opportunities.
According to an Asian Development Bank report, between 2010 and 2050, seven dynamic economies — China, India, Indonesia, Japan, the ROK, Thailand and Malaysia — will account for as much as 91 percent of Asia’s total GDP growth and 53 percent of global GDP growth, creating an “Asian Century”, although this is by no means preordained. Except for India, all these growth dynamos are in the RCEP.
Following a historic Beijing-brokered rapprochement between Saudi Arabia and Iran, the Middle East is tilting toward China and the rest of the RCEP economies. Likewise, China’s centrality in the RCEP will synergize with the BRICS grouping (which will expand on Jan 1 but now comprises Brazil, Russia, India, China and South Africa) and the Shanghai Cooperation Organization.
Over 40 countries have expressed an interest in joining BRICS. Similarly, Iran recently became a full SCO member, while Belarus is set to do so next year. Multiple countries, including Turkiye, Afghanistan and Mongolia, have expressed interest in becoming full-fledged SCO members. All this would make the interconnected RCEP cake much larger.
The RCEP’s global connectivity will provide additional impetus to China’s central bank digital currency, the e-CNY, as a convenient, cost-effective means for cross-border bilateral trade settlements and e-commerce with China, including Hong Kong.
The RCEP’s cooperative dynamics will help accelerate the conclusion of an ASEAN-China code of conduct for the South China Sea.
Last but not least, although China’s island of Taiwan is not a member of the RCEP, its trade and investment are closely linked with the RCEP. The RCEP’s expanded market space and connectivity could augur well for Taiwan’s eventual peaceful reunification with the mainland.