China has taken the lead in RCEP! approval How do foreign trade enterprises dig gold in Southeast Asia?

RCEP detonate Southeast Asia market dividend!

The Regional Comprehensive Economic Partnership Agreement (Regional Comprehensive Economic Partnership, RCEP) was formally signed on 15 November 2020. 2 pin terminal block connector, flat ribbon cable and car reflectors should be noted.

At present, China has completed the approval of the regional comprehensive economic partnership agreement, that is, the RCEP agreement, and has become the first country to ratify the agreement. In addition, Thailand has ratified the Agreement. All member States of the RCEP have indicated that they will ratify the Agreement by the end of this year and facilitate its entry into force on 1 January next year.

The 15 countries that signed the agreement had a total population of about 3.6 billion, or nearly half of the world’s 7.8 billion population. With an economy of about $27 trillion, or about one-third of the world’s GDP, and a trade volume of about one-third of the world’s trade volume, the 15 countries are RCEP the world’s most populous, largest economy and trade area with the most potential for development.

But I am afraid there are a lot of foreign trade friends do not understand, in fact, the earliest RCEP, is ASEAN.

ASEAN countries put forward the idea of RCEP in 2011; that same year, the leaders of the ten countries formally approved the idea at the ASEAN summit.

The 10 ASEAN countries, together with the leaders of China, Japan, the Republic of Korea, India, Australia and New Zealand, issued a joint statement on the launch of negotiations > a comprehensive regional economic partnership agreement in <, which officially launched a free trade zone agreement covering 16 countries.

After that, ASEAN has been actively promoting the formal signing of the RCEP. Viet Nam, our first trading partner in ASEAN, for example, has stressed that the signing of RCEP has always been one of the priorities of Viet Nam’s integration into the international strategy, while Malaysia, the second largest member of ASEAN, has also said that progress agreements should not be hindered by India.

For the regional economy as a whole, there are bilateral free trade agreements between ASEAN countries and ASEAN as a whole and the other five member countries, RCEP a collective escalation of existing agreements.

Overall, the mutual implementation of tariff concessions by RCEP members, open market access, the removal of barriers affecting trade, and the simplification of customs clearance procedures will further reduce trade costs in the RCEP region and promote trade facilitation, which will play a positive role in promoting the growth of trade and investment of the region. The combined reduction of tariffs on about 90 per cent of tariff items by members would stimulate the potential for increased trade and investment in the countries of the region.

On the other hand, according to statistics, China’s manufacturing industry accounts for 65% of the RCEP, the population is 64%, and the economic volume is 55%, which is much larger than any other country in the RCEP, which determines that China has a near dominant position in the RCEP. RCEP will focus on China, the division of industrial chain, which is very beneficial for China to establish its own economic system and international sphere of influence.

For foreign trade people, what opportunities will be worth digging?

Huge market potential

ASEAN now has 10 member countries in GDP order of size: Indonesia, Thailand, Singapore, Malaysia, Philippines, Viet Nam, Myanmar, Cambodia, Laos and Brunei. The total population of each country is currently about 660 million. Coupled with neighboring India, Pakistan and Bangladesh, with a population of more than 2.5 billion, close to twice that of China, huge population size also brings endless business opportunities.

In a report in early October, Price water house Coopers analyzed that most ASEAN countries were still in the early stages of economic development and their economic base was relatively weak. With the rapid development in recent years, the living standard of local people has improved significantly, and the demand and consumption of various products have been increasing.
At present, ASEAN can be divided into three echelons according to the level of economic development:

First echelon: Singapore and Brunei

These two countries have perfect infrastructure construction and economic system, but limited by land area and high labor cost, the industrial volume is relatively small, and mainly concentrated in high-end manufacturing industry.

Second echelon: Malaysia and Thailand

The industrial base of the two countries is relatively perfect, the national education level is higher, and the accumulation in the past few decades has formed a perfect supply chain system in some specific fields, which is highly competitive.

Third echelon: Indonesia, Philippines, Viet Nam, Myanmar, Cambodia and Laos

The industrial base of this echelon country is relatively weak and the level of national development is low, but thanks to the rich labor population and low labor price, it has higher competitiveness in labor-intensive industries. These countries are seen by many foreign investors as the next China, attracting a lot of foreign investment and growing rapidly.

Before the outbreak of the new crown, asean countries maintained an annual GDP growth rate of around 5% for many years, and asean was long regarded as “one of the best performing regions in the world “.

But as a result of the new crown “black swan “, in 2020, five of ASEAN’s six major member countries, Indonesia, Singapore, Malaysia, the Philippines, Thailand and other countries, showed negative growth, only Vietnam” alone “, maintained positive growth, but also significantly slowed down, only 2.9 percent.

However, it is widely expected that the economies of ASEAN countries will turn to recovery in 2021, as in the rest of the world, and the momentum is even stronger, after all, the basic advantages of the region have not changed.

Lower the threshold of industrial chain division

From the division of industrial chain between China and ASEAN countries, China is relatively in the high end of manufacturing industry, and ASEAN countries have advantages in labor-intensive industries because of their demographic dividend. Earlier, China has had direct investment in ASEAN countries, RCEP signed, the low-end industrial chain will accelerate the transfer.

One of the most beneficial will be the textile and clothing industry.

As the largest textile exporter in the world, China has the advantages of whole industry chain production, such as industry research and development, high added value, fast anti-short delivery period, complex product orders, etc. On the other hand, Southeast Asia’s overseas labor cost advantage is remarkable. Tariff advantage with EU North American market occupies the first opportunity.

Apart from textiles and clothing, the tire-based plastic industry will also benefit from RCEP signing. China is the largest tire manufacturer in the world, but the external dependence of natural rubber in China is about 87%. As China joins RCEP, imports natural rubber from Southeast Asia in the future or will truly achieve zero tariffs, it is a major benefit for China’s rubber tire industry.

Furthermore, it is particularly noteworthy that the RCEP has established uniform rules of origin, which will reduce the investment costs of enterprises in the region. In international trade, a large number of products from manufacturing to the final market process, often through multiple cross-border transactions. The regional cumulative rule in the rules of origin means that the proportion of enterprises purchasing in the region reaches 40%, and the product can be regarded as regional origin, thus enjoying preferential arrangements. This will encourage the further improvement and enhancement of regional supply chains and lead to significant growth in intraregional trade and investment.

Post time: Mar-30-2021