Stakeholders Look to BRI Infrastructure as RCEP Trade Pact Expected to Boost China-ASEAN Trade and Investment
The first international freight train along the 1,035-kilometer China-Laos Railway arrives in Vientiane, Laos on December 4, 2021. Photo: VCG
Barely 12 days after it entered service, the 1,035-kilometer China-Laos Railway, a flagship project of China’s proposed Belt and Road Initiative (BRI), had transported goods. with a total value of over 100 million yuan ($ 15 million).
In its first month, localities in China, including Yunnan in southwest China and Shandong and Jiangsu in eastern China, scrambled to open their international freight rail links with that country. once landlocked and now tied to the land.
As the Regional Comprehensive Economic Partnership Agreement (RCEP) goes into effect at the end of this week, as agreed, the business community awaits the prospect and potential of the historic regional trade deal, which is widely expected to provide a significant boost. economic development in the region and fostering trade between China and ASEAN, China’s largest trading partner.
Traders plan to capitalize on what they see as a synergy of economic benefits unleashed by China’s proposed RCEP and BRI as China’s economic and trade cooperation with ASEAN enters a new area of integration. economic.
An employee of a logistics company based in Jiangsu told the Global Times that studies are underway to increase the business volume of rail freight to Laos, as the railroad will cut freight costs in half.
This year marks the 30th anniversary of the establishment of China-ASEAN relations and the two sides are advancing the BRI and the ASEAN Connectivity Master Plan by 2025.
In 2020, ASEAN members became the largest trading bloc with China, with trade volumes reaching 4.740 billion yuan, an increase of 7% year-on-year.
A report by the Xinhua News Agency noted that the BRI will lead the construction of the Trans-Asian Railway and promote regional connectivity.
Xu Liping, director of the Center for Southeast Asian Studies at the Chinese Academy of Social Sciences in Beijing, told the Global Times on Wednesday that the essence of the BRI lies in infrastructure and connectivity, he was confident that the initiative would work in synergy with the RCEP, which promotes and energizes regional trade and investment.
For some, the China-Laos Railway is a real-life example that BRI infrastructure helps and drives trade because of its contribution to regional supply chains.
Nattaporn Triratanasirikul, deputy director general of the Bangkok-based Kasikorn Research Center, told the Global Times that the BIS has laid the economic foundation for the region with infrastructure, trade and financial connectivity.
“This will help support closer regional trade and investment ties in the region after the entry into force of RCEP,” Triratanasirikul said.
Economic and trade relations between China and ASEAN have developed and established through regional supply chains, analysts noted. RCEP, as an extended version of the China-ASEAN Free Trade Agreement, would help deepen trade ties between the two, while providing trade and investment opportunities across broader supply chains. .
Nick Koay, chairman of the Malaysian Chamber of Commerce, told the Global Times that he expects more Chinese manufacturing companies to invest in Malaysia, especially in the production of automobiles and auto components.
In addition, despite its ups and downs, the East Coast Rail Link, Malaysia’s mega rail project, delivered in partnership with a Chinese contractor, is moving forward, Koay said, with the expectation of more large rail projects. speed with China.
A bullet in the arm
The RCEP Compact, which creates the largest free trade bloc in the world, will increase regional GDP by 0.86% and lead to real GDP growth around the world by 0.12 percentage points and world foreign trade by 2 , 91% by 2035, according to a report from China. The Academy of International Trade and Economic Cooperation reported in November.
There will be a net increase of $ 857.1 billion in exports and $ 983.7 billion in imports for the region by 2035, from a baseline, according to the report. Investment in the region will also increase by 1.47%.
The report also revealed that ASEAN members will be the biggest beneficiaries of the pact in terms of GDP growth. An overall increase of 4.47% is forecast by 2035, with an increase of 7.98% for Cambodia; a gain of 7.04 percent for the Philippines and an increase of 6.38 percent for Thailand. Vietnam will experience a 6.33% increase in its GDP.
Analysts said that with less trade friction, agricultural products and auto parts are likely to be two of the main items receiving the most immediate boost, including RCEP’s trade facilitation clauses such as those on rule of origin, which will allow ASEAN to import higher value-added inputs from East Asia and export higher value-added finished products to countries over 5 and its boost on the regional investment.
Not only does the infrastructure of the BRI stimulate the development of physical commerce and investment under the RCEP, but the massive trade pact also works beneficially in the opposite direction, as it could potentially reduce the cost of building some of the key BRI projects currently still underway. planning and development phase.
In Malaysia, stakeholders were already talking about the immediate benefits of RCEP as a complement to BRI.
An official with the China Railway Construction Corporation (CRCC), which is contracting out the electrification and modernization project of the 191-kilometer Gemas-Johor Bahru Railway, told the Global Times on Wednesday that the entry into force of the RCEP agreement could contribute “a windfall” to the railway project it is building in Malaysia.
The rail project, currently 84 percent complete, is also part of the Trans-Asian Railway network. The project created 5,000 local jobs.
“A lot of the traded goods will eventually benefit from zero tariff rates and this is great news for our project, which imports a large amount of building materials,” the company said in its statement, “the director said.
While the BRI project emphasizes local sourcing, some materials must also be imported from China.
At the project site, 43,000 tonnes of steel tracks are to be purchased from China, and this purchase is expected to benefit from RCEP. “We also understand that high-speed trains and Chinese-made locomotives, which already impress customers with their cost performance, will likely see their chances of being ultimately chosen by customers significantly increase due to the effects of ‘RCEP agreement,’ said the director.
It is expected that the reduction of trade barriers and better facilitation following RCEP will allow faster integration of Chinese manufacturing companies into the ASEAN regional supply chain as well as globally, paving the way for exports. wider Chinese rail models and standards, according to the CRCC statement sent to the Global Times.
China will continue to promote high-quality construction of the BRI with all parties in 2022 and will aim to accelerate progress, a spokesperson for the Chinese Foreign Ministry said on Monday. Recently, Cuba became the most recent partner country of the BIS on December 24.
In the first 10 months of 2021, China’s merchandise trade with its BIS partners grew 23% despite global headwinds, according to the ministry.
Flagship projects like the port of Piraeus, the port of Gwadar and the Hungary-Serbia railway are progressing steadily, according to the ministry.
China-Europe Railway Express also saw accelerated growth in freight services and freight volume.
China’s trade with 14 other RCEP signatories accounts for 31 percent of its total foreign trade in the first 11 months of 2021, data from the General Administration of Customs showed on Wednesday.
Analysts said the fact that the BRI has made steady progress is also because China is delivering on its promise to enable inclusive and high-quality growth along BRI routes. This could serve as a benchmark with the US-led G7 initiative known as Build Back Better World (B3W), essentially a political coup.