Import-export opportunities for China market under RCEP
The RCEP comes into effect on January 1, 2022, marking the formation of the world’s largest free trade zone in terms of trade volume. How will the RCEP benefit the trade partnership in the region? How are companies planning to seize this opportunity? More insight can be found in the following texts.
What are RCEP?
The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement in the Asia-Pacific region between the ten ASEAN (Association of Southeast Asian Nations) Members and five of their FTA (Free Trade Agreement) partners. It was signed virtually on November 15, 2020, by 15 nations in the ASEAN Summit. The signatories of RCEP are Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea, Thailand, and Vietnam.
The RCEP covers a market of 2.2 billion people with a combined economic size of $26.2 trillion, or 30 percent of the world’s GDP and a quarter of world exports. And it is also the world’s largest free trade zone, larger than other regional trading blocs such as the EU and the US-Mexico-Canada Agreement (USMCA).
The RCEP was built with the spirit to strengthen economic linkages and to enhance trade and investment related activities as well as to contribute to minimizing development gap among the parties. Thus, apart from the trade in goods, services, and investment, RCEP expands the scope of regional economic integration to include horizontal provisions on e-commerce, government procurement, intellectual property, competition, assistance to SMEs, as well as additional cooperation on the economic and technological fronts.
In 2020, after years negotiation, the 15 Asia-Pacific countries signed the RCEP agreement and on January 1st, the RCEP agreement finally entered into force.
How RCEP will benefit your business?
This is the most concerned questions for all businessmen. We often heard that RECP will not significantly boost economic, trade and investment growth in the region, but also positively boost global trade and welfare growth, but how?
The most direct effect is Tariff Preference:
RCEP is designed to eliminate as much as 90 percent of the tariffs on goods traded between its signatories over the next 20 years from the agreement coming into effect,
Take HaiWan Group as an example, previously, its products were imported from Japan at a rate of 3.3%. After RCEP took effect, the tariff became 3%. Therefore, after comprehensive calculation, the tariff reduction they can enjoy for exports to Japan in the first year is about 1 million RMB. And after the subsequent implement of RCEP, the tariff on this product will be reduced to zero year by year.
The tariff preference will not only benefit business, but also consumers. With lower tariff, consumers will get the products with lower price, which will help to boost the market in return.
Not only common trade, but e-commerce will also benefit a lot from the agreement.
The regulations of RCEP on e-commerce, including the facilitation of paperless trade, e-authentication, e-signatures, and the personal information protection for e-commerce users and online consumers, will provide a more conducive trade environment for cross-border e-commerce.
The RCEP is expected to have a far-reaching impact on regional trade facilitation and international economic integration over the next decades. With the development, cross-border e-commerce shopping will benefit more and more from RCEP.
China will embrace a blooming market
For China, Japan and South Korea, RCEP led to the three countries’ first regional free-trade agreement. Prior to the RCEP, Japan has yet to sign free trade agreements with China and the ROK and is an important trading partner of each other. From the perspective of tariff concessions, RCEP will make China, Japan and the ROK the biggest beneficiaries.
The implement of RCEP will facilitate trade flows between the three countries. According to the tariff reduction commitments of each country under THE RCEP, China’s tariff elimination rate to Japan and the ROK will eventually reach 86 percent, while Japan’s and the ROK’s tariff elimination rates to China will reach 88 percent and 86 percent respectively.
Although this ratio is still lower than the degree of tariff reduction among other member states, it can provide more trade opportunities for China, Japan and the ROK to a certain extent and strengthen the economic ties among the three countries, laying a foundation for the negotiation of the China-Japan-ROK free trade Area. Of course, this negotiation will still be influenced by the diplomatic relations of the three parties.
According to Wang Shouwen, China’ Vice Minister of Commerce, the RCEP will remove tariffs on nearly 30 percent of China’s exports.
Import-wise, China will benefit from cheaper imports of advanced technology, key equipment, key parts and components, consumer goods, pharmaceuticals, and medical equipment, as well as production services, such as design, research and development (R&D), energy conservation, and environmental protection, to better meet the needs of the domestic market for high-quality goods and services.
The proportion is expected to grow further in the future because of the RCEP.
Inevitably, China will embrace a blooming market. March to China market will be an urgent for global companies.
How to grasp the opportunity in China Market
Entering China Market is on the agenda of many companies for it is large and growing. There are three main strategies: find a distributor; ecommerce; invest in China.
Among these three strategies, e-commerce is the most effective way nowadays. Tmall International, JD International, Kaola and a lot of other collective platforms are available in China. And of course, a new trend is the Mini Program store.
A mini program store usually based on WeChat and Alipay, two social and payment applications used by billions of Chinese every day.
By choosing a cross-border e-commerce service provider, LinkieBuy for example. You will get an independent online-store Mini Program in a short time. This Mini Program is based on social media like WeChat, where are a lot of potential customers could be found.
But due to the culture differences, how to attract those potential customers is a big challenge. Platform like LinkieBuy developed their own management team, they will seek customers from WeChat and other social media to increase the turnover of the store. And by customer management, the store will build its reputation to attract more followers.
Cross border E-commerce is a kind of direct exportation, business owner can have direct dialogue with customers, it’s good for the update of the products. And through direct connect, the store may find a new demand.
With the development of RCEP, the ship and e-commerce environment will be better and better for merchants.