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RCEP to help China offshore lower-end industry
Will shorten supply chains, in Covid lesson
The world's biggest free trade deal will help China strengthen its Asian supply chains to rival western-led networks at a time of worsening relations with the U.S., policy advisors in Beijing told MNI.
The Regional Comprehensive Economic Partnership will unify rules of origin and lower tariffs over 20 years for 15 countries from China to New Zealand, enabling China to offshore some lower-end manufacturing to cheaper locales in Southeast Asia as it moves up the value chain, advisors said.
Not only will RCEP offer stable supplies of intermediate goods for Chinese manufacturing, it will also feed a growing Chinese appetite for consumer products as the nation boosts domestic demand in line with its new "dual circulation" strategy, said Tu Xinquan, Dean of China Institute for WTO Studies, University of International Business and Economics.
It will also shorten China's supply chains, acting on one of the lessons of the Covid-19 pandemic.
Signed on Nov. 15, the deal comes as Beijing increasingly prioritises regional trade in the face of what it expects to be a continued decoupling from the U.S.,even under Joe Biden, who is expected to try to rally allies against what the U.S. perceives as China's unfair trade advantages.
RCEP's network will "rival European and North American ones led by the EU and U.S.-Mexico-Canada," said Song Hong, head of international trade research at the Chinese Academy of Social Sciences' Institute of World Economics and Politics.
Song likened the potential impact of RCEP to that of the China–ASEAN Free Trade Area created 20 years ago. "No one could've imagined ASEAN would replace the EU to become our biggest trading partner," he said.
BOOST TO GROWTH
RCEP could boost China's GDP growth in the next five years by 4 basis points, lifting exports and imports by 1.95% and 1.63%, according to the CCID Group, under the Ministry of Industry and Information Technology.
While Beijing already had near-zero tariff agreements with most of the pact's member states, RCEP will aim at bilateral tariff reduction with Japan for the first time.
Unlike other trade deals, it avoids contentious areas such as state-owned enterprises and workers' rights while allowing flexibility in meeting targets, including for tariff reduction. The tricky issue of digital trade has been set aside, noted Zhang Yuyan, director of the Institute of World Economics and Politics of Chinese Academy of Social Sciences.
Referring to China's strained relations with RCEP-partner Australia, a policy advisor who requested anonymity said that while the agreement may not repair bilateral ties, it would be "like a safety net preventing the relationship from completely falling apart."
Chinese Premier Li Keqiang on Wednesday urged greater efforts to prepare for RCEP's implementation. "China will face few problems as the deal doesn't involve many changes to domestic regulations," said Tu.