RCEP paying off for Asia-Pacific region
Trade pact boosts prospects of export, import firms; spurs investment in China and across other partner countries
These days, workers of Heze Sanqing Food Co Ltd, a food processor based in Heze, East China’s Shandong province, are busy unloading and loading unusually large amounts of goods. The firm produces 100,000 metric tons of canned fruits and vegetables per year, averaging about 274 tons a day.
One day recently, a huge consignment of canned pineapples arrived from the Philippines, the last signatory member to bring into effect, on June 2, the Regional Comprehensive Economic Partnership (RCEP) agreement. After quick processing at Sanqing Food, the fruits were exported to Australia.
This was unthinkable until recently. In the pre-RCEP days, the benefits of the China-Australia Free Trade Agreement (FTA) were not applicable to raw materials that China imported from the Philippines.
Sanqing Food’s products are mainly for export. The Australian market accounts for about 40 percent of its overseas sales. Canned pineapples, papayas and other products, imported in large quantities as raw materials from the Philippines, could not enjoy the preferential tariffs of the China-Australia FTA signed in 2015.
Thanks to the Philippines’ implementation of the RCEP from June 2, however, firms such as Sanqing Food are reaping huge benefits like tariff reduction and speedy Customs clearance, said Tang Linglin, the firm’s general manager.
The RCEP agreement, signed by 15 countries — China, Japan, South Korea, Australia, New Zealand and the 10 member countries of the Association of Southeast Asian Nations — took effect on Jan 1, 2022. Its aim is to gradually eliminate tariffs on over 90 percent of the goods traded among the 15 member countries.
Under the RCEP rules, when determining the origin of goods, the free trade area can be regarded as a whole. Sanqing Food can apply the RCEP’s cumulative rules of origin and treat the fruits imported from ASEAN as of Chinese origin. Therefore, when exporting to Australia, the tariff can be lowered from 5 percent to zero.
Given the softening global goods demand, geopolitical and geo-economic challenges, and decline in cross-border investment, the fully implemented RCEP pact will significantly enhance economic integration in the Asia-Pacific region and sustain the long-term and stable growth of the global economy, business leaders and government officials said.
With the gradual reduction of tariffs, the RCEP will offer consumers a wider range of market options, meeting the demand for cross-border consumption and helping boost overall consumption, said Eddy Chan, senior vice-president of the United Statesbased FedEx Express.
Echoing that viewpoint, Liu Qing, vice-president of the China Institute of International Studies, said the RCEP framework has enriched the comparative advantages of each of the 15 member countries, making each of them more attractive to others for trade and investment.
“The agreement brings together finances, resources, technologies and services, establishing a comprehensive cycle of regional economic collaboration,” said Liu, adding that many signatory countries, such as China and Japan, have already expedited the distribution of market components to drive forward institutional openness.
China’s trade with 14 other RCEP economies grew by 7.5 percent yearon-year to 12.95 trillion yuan ($1.76 trillion) in 2022, accounting for nearly 31 percent of the country’s total trade last year, data from the General Administration of Customs (GAC) showed.
Despite a complex and severe external environment, China’s trade with RCEP partners totaled 6.1 trillion yuan in the first half of this year, up 1.5 percent year-on-year, contributing more than 20 percent to the nation’s foreign trade growth.
During a ministerial meeting in Indonesia in late August, senior government officials from the RCEP member countries said they would accelerate the completion of the conversion of tariff regulations to make sure the implementation of tariff reduction runs smoothly.
Describing the RCEP as a comprehensive, advanced and mutually beneficial economic partnership, Li Fei, China’s vice-minister of commerce, said effective implementation of the RCEP is of great significance to all members in promoting trade and investment growth, and maintaining the security and stability of regional industrial and supply chains.
Addressing the meeting, Li said China hopes that all member countries will accelerate the discussions on the procedures for new members to join the bloc, and reach an agreement as soon as possible.
The meeting approved the responsibilities of the RCEP secretariat, and thus will help promote the organization’s operationalization before Jan 1. The meeting also instructed the RCEP joint committee and its subsidiary bodies to ensure transparency in the smooth and effective implementation of the agreement.
That would benefit firms such as Sanqing Food and Wuxi Richang Clothing Co Ltd even more. Based in Wuxi, East China’s Jiangsu province, Richang Clothing has seen its workers actively engage in packaging a diverse range of newly made dresses, which will be shipped to several countries.
“This year, women’s pajamas needed the largest number of the RCEP certificates of origin secured by the company. The import tariff rate in Japan has been reduced to 6.5 percent and will drop further by 0.5 of a percentage point each year. Similarly, other products like dresses and trench coats will see annual reductions in import tariff rate of 0.5 to 1 percentage point,” said Gu Wei, head of the company’s trade department.
Gu said this arrangement creates a favorable environment for the recovery of China’s garment industry and enhances the company’s confidence in future growth prospects.
Richang Clothing received 344 RCEP certificates of origin from the Customs authorities in the first seven months of this year, with a total value of 43.43 million yuan. This has enabled the company to enjoy a tariff preference of 500,000 yuan in destination countries. Meanwhile, its exports to Japan surged by more than 30 percent year-on-year.
To boost China’s trade with other RCEP partners, expand interaction with trading partners worldwide and support the growth of the New International Land-Sea Trade Corridor, the GAC unveiled 15 policy measures in early August.
Launched in 2017, the land-sea corridor is a trade and logistics passage jointly established by provincial-level regions in western China and ASEAN members. It is also one of the key projects of the Belt and Road Initiative (BRI).
Wu Haiping, director-general of the Department of General Operation of the GAC, said the new measures include improving the land-sea trade corridor’s links with the booming China-Europe freight train services and the Yangtze River Economic Belt.
They also help domestic companies to benefit fully from the RCEP agreement by further fostering smoother and more efficient trade routes connecting western China with key seaports and rail hubs in the Asia-Pacific region and Europe, he said.
The full implementation of the RCEP agreement plays the role of ballast in attracting foreign investment to China as more investors are actively pursuing business opportunities that have arisen and further deepening their existing cooperation, said Zhu Bing, director-general of the Foreign Investment Administration Department at the Ministry of Commerce.
Zhang Yansheng, chief research fellow at the China Center for International Economic Exchanges, echoed that view, saying: “More foreign companies will continue to take root in China due to the comprehensive implementation of the RCEP.”
“Multinational corporations can expand their future industrial and supply chains to China-ASEAN, China-Japan-ROK and China-Australia-New Zealand regional economic cooperation circles. This expansion enables them to access significant trade and investment prospects stemming from regional growth.”
Mike Walsh, executive vice-president of Dekra Group, a German testing, inspection and certification group with more than 48,000 employees globally, said the RCEP will create more favorable conditions to spur foreign trade and investment activities both in China and throughout the Asia-Pacific region.
“We plan to use the technological capabilities accumulated in China to develop our operations in Southeast Asia in the coming years,” said Walsh, adding that the RCEP pact supports his company’s overall development plan for the Asia-Pacific region in terms of market and business management.
London-headquartered RX, one of the world’s largest trade fair and event organizers in terms of sales revenue, said it will hold more business exhibitions across China and other RCEP markets to meet the demand from local companies seeking to boost exports in the coming years.
“With a large number of Chinese companies rushing to participate in various trade fairs across the world since late last year, one of the key values of trade shows is to have both suppliers and buyers meet and do business more efficiently and effectively,” said Hugh Jones, the group’s CEO, adding that this value is particularly important for the firm’s international customers, as most of them are small and medium-sized enterprises.
As the RCEP agreement has created favorable conditions to spur foreign trade and investment activities, companies from signatory countries will have more demand to participate in various trade shows in the Asia-Pacific region in the years ahead, Jones said.