RCEP: China says world’s largest trade pact gives it ‘powerful leverage’ to cope with 2022 challenges

Tan KW

Publish date: Fri, 31 Dec 2021, 06:58 PM

China is doubling down on the critical role that the world’s largest trade pact will play in helping it buffer the impact of the coronavirus while promoting growth in the face of “unprecedented” trade challenges during the coming year.

The Regional Comprehensive Economic Partnership (RCEP), comprising 15 member countries - including China and covering approximately 30 per cent of the world’s population and global gross domestic product - will take effect for most members on Saturday.

Tariffs on more than 65 per cent of China’s trade in goods with Asean, Australia and New Zealand are expected to immediately reach zero under the regional agreement.

“[Its entry into force] will effectively hedge against the negative economic impacts of Covid-19,” Ren Hongbin, vice-minister of commerce, said at a press conference on Thursday.

Beijing also said the deal will serve as “powerful leverage” for keeping trade and foreign investment stable in 2022, as it will expand exports of Chinese products while helping speed up China’s industrial transformation.

Ren added that China was ready to fulfil 701 binding obligations under the trade agreement, with its implementation marking a new milestone in China’s opening-up.

Although it was the 10-member Association of Southeast Asian Nations that initiated the partnership, Beijing was seen playing an increasingly active role. Chinese decision-makers ramped up their focus on the regional trade deal while mired in growing tensions with Washington and its allies, compounded by the shock of the coronavirus.

The ministry said that the agreement will gradually lift tariffs for China’s imports of coconut milk, pineapple products and paper products from Asean countries.

Under the umbrella of RCEP, China has also reached its first free-trade arrangement with Japan, which is the world’s third-largest economy and China’s fourth-largest trading partner.

“The two sides will substantially reduce tariffs on each other in many areas, such as machinery and equipment, electronic information, chemical industry, light industrial textiles, and so on. In particular, 57 per cent of China’s exports to Japan next year will immediately achieve zero tariffs, which will obviously promote trade,” Yu Benlin, head of international economic and trade affairs at the commerce ministry, said on Thursday.

He also said the RCEP will boost investment opportunities between China and other member states, as it ushers in wider access for foreign investors and increases policy transparency.

But Ren still warned that stabilising trade in the coming year will be harder than ever.

Beijing has been ramping up its warnings about the country’s trade prospects in 2022, even as its export machine churned out goods over the past 12 months under the prolonged pandemic.

In an interview published on Tuesday by the state-run Economic Daily, Commerce Minister Wang Wentao said that “threefold pressure” - contracting demand, supply shocks and weakening expectation - will be more apparent in the commerce realm during 2022.

At a meeting last week, the State Council, China’s cabinet, announced that more policies would be rolled out to help importers and exporters, while warning that “the uncertainties, instability and imbalance facing trade at present are increasing”.

Ren expected on Thursday that the total value of China’s exports and imports would exceed US$6 trillion this year - up over 20 per cent from 2020 - further consolidating the country’s status as the world’s largest trader.

However, the high base from this year is likely to become a large hurdle in 2022, Ren warned, noting the Omicron coronavirus variant and a widening gap between developed and low-income nations could also have a negative impact on China’s trade.

“The supply-chain bottleneck is difficult to completely alleviate ... port congestions continue, the risk of partial breakages in the supply chain is rising, raw-material and transport costs remain high, and shortages in chips, containers and labourers persist,” he added.

The ministry will help Chinese trade firms continue to develop business in the United States and Europe, while further taping into the Asean market, Ren said.

Li Xingqian, head of trade at the commerce ministry, also said Chinese authorities would pay more attention to exchanges and cooperation with trading partners via bilateral and multilateral mechanisms.

Imports and exports between China and the other 14 members of the RCEP totalled 10.96 trillion yuan (US$1.72 trillion) in the first 11 months of this year, accounting for 31 per cent of China’s total foreign trade value, Chinese customs data shows.

The RCEP will take effect in Australia, Brunei, Cambodia, China, Japan, Laos, Singapore, Thailand, Vietnam and New Zealand on Saturday, but the agreement will not officially take effect in South Korea until February 1.

More than 90 per cent of merchandise trade between RCEP members will eventually be subject to zero tariffs.

- SCMP

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