The signing of the Regional Comprehensive Economic Partnership (RCEP), the world’s largest free trade agreement, marks a milestone for the Asia-Pacific region. Amid global economic uncertainty and threats of protectionism, the RCEP free trade commitment promises to speed up regional economic integration and assist post-Covid recovery.
But with scale comes complexity. Many of our clients and partners ask: “What does it mean for our business?”
For European manufacturing firms, the RCEP offers both challenges and opportunities in the form of greater market access and increased competition. Locally sourcing components to supply a Chinese manufactory will become cheaper due to reduced tariffs. Locally manufacturing high-end goods for the Chinese market may become more challenging due to competition from Asian firms.
Here we outline some other impacts of RCEP and how Acclime can assist your business to maximise its benefits.
Why is the RCEP so significant?
More than 30% of global trade stems from the 15 members of the RCEP, making the agreement hugely significant both within and outside the region. RCEP will:
- Provide a gateway to new investment opportunities in Asia Pacific markets. Setting a new global precedent, China will now have a free trade agreement with Japan and South Korea.
- Simplify existing trade agreements and improve trade between those without bilateral agreements. For example, Vietnam granted improved access to its market for companies registered in RCEP member states.
- Unify rules of origin and related customs procedures, lowering supply chain costs for regional multinational businesses.
Three key considerations:
How quickly will RCEP be implemented?
Although China will move for speedy implementation after ratification in 2021, the complexity of the agreement makes it difficult to predict the reaching of key milestones. Tariff schedules will vary from country to country and the reduction and elimination of tariffs will take up to 20 years in some cases.
Will there be increased competition for foreign companies in China?
Greater economic integration across the region will benefit RCEP members and foreign companies alike. China continues to actively seek foreign investment and improved market access for foreign companies.
Will Hong Kong join the RCEP?
Hong Kong has expressed keen interest in joining RCEP after the initial agreement takes effect and is supported by existing members, including China.
How Acclime can help
For companies already active in Asia, RCEP provides a chance to recalibrate their regional strategy.
Future investors need to take a closer look at their global production and sales strategy under RCEP to make sure they utilise the most effective supply chain and manufacturing strategies.
Acclime China can provide support to international companies in Greater China and Singapore through our value-added services so your company can take advantage of RCEP benefits in the short- and long-term. Get in touch with us to discuss:
- Tariff and location analysis for your supply chain
- Transfer pricing analysis focusing on regional HQs in Asia’s premier financial hubs Hong Kong and Singapore
- Keeping track of complex operations (invoicing, order processing, inventory management and pricing) through Acclime’s ERP system