The Regional Comprehensive Economic Partnership (RCEP): an analysis of its potential benefits for China

Abstract

Regional Comprehensive Economic Partnership (RCEP) is a mega-regional free trade agreement aimed to remove tariff and non-tariff trade barriers, increase trade facilitation, liberalise investment, and promote global value chains among the member countries. The study aims to know the importance of RCEP regarding trade, foreign direct investment and other economic affairs for China and its potential economic benefits for members. It has provided for a 90% tariff reduction on trade among its 15 members. It can potentially increase trade and FDI inflow to China through the trade and FDI creation effects. Establishing a business-friendly market in the Asia Pacific region and the tariff reduction provisions of this agreement have many advantages for the Chinese economy. Among its members, China is the leading economic power. Therefore, she will get maximum economic benefits as, according to statistical simulations, it will increase her international trade, exports, services, and FDI inflow. The current 2.2% tariff imposed on Chinese exports in the RCEP market will be decreased to 0.4%. The expected economic profit to China from this agreement is 214 billion dollars, equal to 2.2% of its GDP and a 13.4% increase in FDI inflow.