BEIJING, Jan 18, 2020, SCMP. An unexpected effect of the US-China trade war has been an apparent acceleration of the process to forge an Asian trading bloc that does not include United States, according to Deloitte China’s chief economist Xu Sitao, South China Morning Post reported.
After a renewed push from China, an initial Regional Comprehensive Economic Partnership (RCEP) agreement was finally reached in November 2019 after six years of talks, with the deal that would create the world’s largest free trade bloc possibly being signed in November 2020, according to China’s Ministry of Commerce.
It involves the 10-member Asean bloc plus Australia, China, Japan, New Zealand and South Korea, with India eventually deciding not to participate.
“The trade war has brought a positive effect … the RCEP, where you’d have previously thought would require many years to negotiate for. But unexpectedly, an agreement has been reached,” said Xu in Hong Kong this week, a day before the US and China signed their long-awaited phase one trade war deal. “Overall, everyone is concerned about economic growth.”
Since US President Donald Trump started to impose punitive tariffs on Chinese products in the middle of 2018, the likes of Taiwan, Japan and South Korea have benefited from reshoring, according to Xu, with companies relocating production back home to avoid tariffs placed on exports from China.
Vietnam and Indonesia have also benefited as alternative manufacturing locations to China.
Taiwan’s InvesTaiwan, a interministerial organisation focused on boosting investment, recorded that 164 Taiwanese businesses pledged to invest NT$711.6 billion (US$23.8 billion) in the island last year. The trend has prompted officials to lift the 2019 economic outlook to 2.4 per cent from the previous 2.19 per cent. In its forecast for 2020, global consulting firm Deloitte projects the Taiwanese economy to grow by 2.1 per cent.
Details of the commitments China made as part of its trade deal with the US in areas such as intellectual property, market access, currency and imports were released by China’s Ministry of Finance on Thursday morning.
And for Xu, China’s promises to open up its market could be an effective way to ease many of their existing economic structural problems.
“I believe China has many areas it needs to reform. For it to address so many aspects at the same time would be difficult, but to reform, I think the best entry point would be [widening] market access,” said Xu.
“Because allowing market access will naturally lead to changes to [resolve] existing problems. Not that the problems will disappear, but they could be partly eased.”
Market access, or lack of it, has long been central to the US’ criticism of China’s unfair practices by restricting American companies’ presence, demanding technology transfers in exchange to enter the Chinese market and arming Chinese firms with generous subsidies and cheap loans to rival foreign firms in the most lucrative industries.
China has agreed to some provisions regarding market access as part of the deal, in areas including financial services. Thornier issue, including state subsidies, were not included and are expected to be discussed as part of the phase two talks.
“What needs to be done is to implement what has been agreed in the deal,” Xu added.
Chinese Vice-Premier Liu He told Chinese media after the deal was signed that the concessions made by Beijing to Washington would also be applied to China’s other trade partners.