By 2035, RCEP will drive China's economic welfare to increase by nearly 100 billion U.S. dollars

The Regional Comprehensive Economic Partnership Agreement (RCEP) will come into effect on January 1, 2022 in the six ASEAN countries and non-ASEAN member countries such as China, Japan, Australia and New Zealand. The latest "RCEP Impact Assessment Report on Regional Economy" issued by the Research Institute of the Ministry of Commerce of China shows that by 2035, the effective implementation of RCEP will drive China's economic welfare to a cumulative increase of nearly 100 billion U.S. dollars over the baseline situation.

China, ASEAN and Japan have the most significant improvements in economic welfare

After the RCEP takes effect, more than 90% of the goods trade in the region will eventually achieve zero tariffs. The simulation results of the "RCEP Impact Assessment Report on the Regional Economy" show that among the RCEP member countries, ASEAN countries have benefited the most from the macroeconomic level. Compared to the baseline scenario, the cumulative growth rate of ASEAN's overall GDP by 2035 will increase by 4.47% due to RCEP. Among them, the cumulative GDP growth rate of Cambodia, the Philippines, Thailand, and Vietnam is more than 6%. From the perspective of import and export growth rates, among ASEAN members, the Philippines, Cambodia, Thailand, and Vietnam have cumulatively increased by more than 20%.

From the perspective of economic welfare, RCEP has a positive effect on the economic welfare of major member countries, with China, ASEAN and Japan improving the most. The simulation results show that by 2035, China’s economic welfare will increase by a cumulative US$99.6 billion over the baseline situation.

From the perspective of labor factors, after the RCEP takes effect, the wages of unskilled and skilled labor in ASEAN countries will have a relatively large increase. Among them, Cambodia, Vietnam, the Philippines and other countries have the most significant growth rates.

In an interview with reporters, Yu Benlin, director of the International Department of the Ministry of Commerce of China, said that RCEP will strongly promote the economic growth of member countries: "RCEP member countries have pushed for the agreement to enter into force as scheduled, issued a strong opposition to trade protectionism, supports free trade, and safeguards the multilateral trading system. The signal will strongly boost the confidence of member states and work together to achieve economic recovery after the epidemic."

Some companies will face more intense market competition

As the world's largest free trade agreement, after the RCEP takes effect, it will reduce trade and investment barriers, improve the level of regional economic integration, and promote the formation of a unified regional market. The report shows that this will promote the growth of import and export trade in China's agriculture, light industry, textiles, automobiles, machinery, electronic information, petrochemicals and other key industries. However, some industries such as petrochemicals and machinery need to continuously improve their capabilities in the fiercer market competition. 

Yu Zirong, deputy dean of the Research Institute of the Ministry of Commerce, also mentioned in an interview with reporters that RCEP has made enterprises face more intense market competition. "The technological advantages of Japanese and Korean companies in the high-end manufacturing field and the cost advantages of ASEAN companies in labor-intensive industries (will be more prominent), Chinese companies will face certain competitive pressures in the domestic and regional markets; on the other hand, they will also Put forward higher requirements for the international operation of Chinese enterprises, requiring Chinese enterprises to deeply and accurately grasp the rules of origin of RCEP member countries, inspection and quarantine policies, intellectual property laws and regulations, and market competition policies."

For example, Zhejiang, a major foreign trade province, proposed that after the RCEP takes effect, the international market competitiveness of some "high energy, high pollution and resource" industries and labor-intensive manufacturing foreign trade enterprises will be weakened. If the transition is difficult, there may be the risk of being eliminated; "zero tariff" will cause the unit price of imported shoes to fall, which will have an impact on shoe manufacturers in Taizhou and Wenzhou.

Shenzhen City pointed out that the acceleration of mid-to-high-end products from Japan, South Korea and other countries into the Chinese market will impact Shenzhen's superior high-tech industries to a certain extent.

Hainan is concerned that the effective implementation of RCEP will weaken Hainan’s open advantage in service trade, weaken Hainan’s advantage of zero tariffs, and may divert consumption in Hainan’s duty-free market.

The report recommends the establishment of RCEP economic and trade cooperation demonstration zones

The report recommends that all localities should provide enterprises with intelligent, precise and convenient services to help enterprises fully "enjoy benefits" and "haven risks." Yu Zirong suggested that all localities actively build RCEP economic and trade cooperation demonstration zones, and speed up reform and opening up in accordance with the standards of the agreement. "Compared with the standards of the agreement, especially the facilitation of the certificate of origin, the protection of intellectual property rights, the optimization of the business environment, and combining the characteristics of the local industry to sort out the list of goods, services and investment industries in the region with potential for trade under the RCEP conditions, and guide this Regional enterprises can fully tap the (potential) of deepening investment and trade cooperation with RCEP members.