The Impact Of China-backed Deal On China, Investors and Workers

According to analysts and economists, China-backed trade and investment deal will unlikely bring immediate substantial benefits to its developing member countries. The China-backed trade agreement or formally known as Regional Co-op. Economic Partnership (RCEP) currently represents about a third of the global economy.

The RCEP is a free trade agreement between 15 Asia-Pacific nations. All 15 signatories to the need to approve it. According to experts, this will consume time.

The partnership includes varying levels of tariff discounts for each country and product. This might result in labor-intensive economies leading up to more imports than exports in a short period of time.

The RCEP is viewed as a substitute to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Before former President Donald Trump pulled out of the deal, The US had managed the formulation of the CPTPP’s predecessor. The remaining countries accordingly shaped the CPTPP without the US.

The Asia Pacific regional secretary, Kate Lappin noted that RCEP has no provisions regarding the improvement of labor rights in member countries. He added that the labor conditions have worsened following the COVID-19 pandemic, which significantly reduced the wages.

However, he added even though the agreement wasn’t favorable for governments and laborers, it would still be profitable for foreign investors.

The economist at AXA Investment Managers, Aidan Yao threw light on the probable long-term advantage. He stated that businesses would be encouraged to build supply chain setups within the territory.

He added that RCEP helps standardize rules of origin when trading within the territory. This means that as long as the members of RCEP are involved in importing the products, the product would be eligible for a tariff waiver.

Followed by this was Yao’s prediction that Indonesia, Vietnam, and Malaysia would get the most benefit in the long-run.

The RCEP agreement will make it simpler for Chinese firms to run regional supply chains all the more proficiently, noted Chris Rogers.

He added that consequently, Southeast Asian countries would get better access to China, South Korea, and Japan.

Furthermore, he said that it is not expected that RCEP would facilitate a major increase in infrastructure investment. However, investment by companies in supply chains will most likely go up.

The founder of Asian Trade Center, Deborah Elms was worried that RCEP did not give investors protection against governments that tried to confiscate private assets.

Given the ongoing economic slowdown, RCEP will assure China of market access and exchange of technical know-how. This will play a key factor in upgrading the country’s manufacturing industry. Resultantly, China will be able to achieve more value-added production. It will provide economic certainty to the country’s own local business.

The RCEP will also support the country’s objective and aim of ensuring overall macroeconomic stability.