RCEP brings new development to businesses in the region.
The signing of the RCEP agreement, witnessed by the leaders of participating countries China, 10 ASEAN member states, South Korea, Japan, Australia and New Zealand via video link on 15 November 2020, marked the creation of the largest free trade bloc in the world in terms of economic power and population. Its huge market potential has attracted the immediate interest of global business. The signatories to the RCEP agreement represent 2.2 billion people, almost 30% of world population. Their combined GDPs total US$ 26.2 trillion or some 30% of the global economy, and they account for nearly 28% of global trade . The enhanced market access to the 15 signatory states made possible by the agreement will create vast market opportunities for businesses in the region and beyond.
This is particularly significant at a time when lockdowns caused by the Covid-19 continue to disrupt global markets and supply chains. Yet effective pandemic prevention and control work in some countries and regions, such as China and certain ASEAN members, has resulted in a gradual recovery of many economic activities, so that industrial production is increasingly robust and demand from the consumer market is growing. Foreign direct investment (FDI) flows to developing countries in Asia, which accounted for more than half of global inward and outward FDI flows, continued to increase in 2020 despite global FDI contraction, according to a recent report released by the United Nations Conference on Trade and Development (UNCTAD). UNCTAD also pointed out that FDI prospects for Asia will remain resilient in 2021, as the Asian region could be further strengthened by the signing of the RCEP agreement .
Many companies are reviewing their development strategies to address the revived demand in Asia and beyond. Business operations worldwide have pursued digitalisation at an unprecedented pace to deal with the devastating effects of the pandemic. Digital platforms and cross-border e-commerce activities have become more prominent than ever. As supply chains especially in Asia gear up for production, companies are challenged to ride the momentum of recovery and reposition themselves digitally to revive business, to achieve sustainable development and move towards a post-pandemic era.
In the circumstances, the RCEP is expected to further the advancement and integration of regional supply chains, as well as encourage the specialisation of production. Asia has already developed the world’s largest co-operative manufacturing base, boosted by transfers from the West to low-cost Asian locations in the last few decades. Integration will be enhanced by RCEP provisions like tariff elimination on most finished products, intermediate goods and raw materials, easier customs procedures, promotion of e-commerce, protection of intellectual property rights and simplified cross-border investment. The agreement, which should be implemented by as soon as January 2022 , will have far-reaching impacts on supply chains and production relationships in the region. Hong Kong, as a city in the GBA, will be an important business hub to help enterprises in the region handle their production, trading and related investment businesses. Further integration of supply chains will elicit more business opportunities for consultants and service providers in the city.
GDP of RCEP countries in 2020 (in USD billion)