context: The text-based negotiations of RCEP were reported finalised in November 2019, paving the way for further regional economic integration and facilitating East Asia FTA negotiations.
RCEP, the world's largest FTZ when concluded in 2020, will help Chinese enterprises 'Go Global' and realise technical and production upgrades by utilising regional resources and technologies, notes Tian Wei 田巍 Peking University School of Economics associate professor.
RCEP's market structure will bring intensive linkage between upstream and downstream industries. ASEAN's emerging economies will undertake more processing from developed economies and Chinese enterprises, while Chinese enterprises can use RCEP to enter developed markets such as Japan and South Korea, Tian says.
Tian points out the two main forms of greenfield investment for Chinese enterprises 'going global' are production type investment (by building plants overseas), and trade service type investment aimed at operating overseas, which could assist and supplement domestic parent companies in import-export
Tian predicts RCEP will facilitate FDI of China's manufacturing, especially of coastal private export SMEs, as many will establish offices in RCEP countries, helping them develop their brands. He notes RCEP clauses will address negotiations on SME investment facilitation, including further reducing market barriers, increasing transparency, and reducing risks.
Tian notes Chinese companies facing rising land and labour costs, especially in textile and electronics industries, are shifting production line from eastern to central and western regions and overseas countries with low costs, including ASEAN countries.
In RCEP's more integrated and competitive market, Chinese enterprises will need to compete with ASEAN countries' low labour costs and developed countries' high-quality products, by relocating production lines, transitioning from labour-intensive production to R&D and capital-intensive production, and from low-value-added production to the high-end of industrial chains. Importantly, says Tian, they will depend on the Chinese government's policy support ("Go Global"), as well as technical breakthroughs.