Enjoying the RCEP momentum

RIGHT after the clock struck midnight on New Year’s day, a cargo train carrying an assortment of goods left the station in Nanning city of southern Guangxi Zhuang Autonomous Region.

With 25 containers on board, the train – loaded with groceries, electronic components, chemical products, and other items worth some US$10mil (RM42.18mil) – headed straight to Hanoi.

This was the first batch of exports from China under the Regional Comprehensive Economic Partnership (RCEP) as the free trade agreement (FTA) came into force for China and most participating nations on Jan 1.

The FTA, the formation of the world’s largest free trade zone, has saved Chinese companies some US$900,000 (RM3.8mil) in taxes.

Around the same time, a vessel from Japan was navigating its way into Shenzhen Huanggang Port in southern China.

Carrying 5.6 tonnes of reflective film worth 1.33 million yuan (RM880,000), the goods marked the first import of China under the agreement.

RCEP consists of 15 members including the 10 Asean nations: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam, Australia, China, Japan, New Zealand and South Korea.

Although it has been signed, the treaty has yet to come into effect for Indonesia, Myanmar and the Philippines.

RCEP is aimed at strengthening regional value chain by reducing or eliminating import duties, promoting investment liberalisation as well as facilitating e-commerce.

Just two months after it came into force, the treaty is showing vitality in rejuvenating the Chinese economy.

China-Asean Business Council executive president Xu Ningning said trade values between China and RCEP members hit 1.85 trillion yuan (RM1.23 trillion) in the first two months of 2022, a 9.5% increase compared to the same period last year.

He noted that the agreement provides a vast market for businesses, particularly small and medium enterprises, and will play a vital role in revitalising the economy.

He encouraged industry players from trade-related fields such as finance, logistics services, advertising, accounting and law firms to be proactive, taking the initiative to establish collaboration with member nations.

RCEP officially came into effect for Malaysia on March 18.

Malaysian Ambassador to China Raja Datuk Nushirwan Zainal Abidin said the FTA would help the country expand and strengthen business collaborations with other partnering nations.

He urged Malaysian businesses to tap into the FTA to explore new markets and opportunities outside the country.

As the world economy gradually picks up again, he noted that RCEP could act as a catalyst to boost businesses and economic activities.

Raja Nushirwan pointed out that bilateral trade between Malaysia and China had shown a promising growth with a total value of US$176bil (RM742.42bil) recorded in 2021.

The figure was nearly 35% more, compared to the year before.

The Ministry of International Trade and Industry (Miti) said the partnership that comprises nearly a third of the global population (over 2.2 billion) enables Malaysia to enjoy the global trade and investment ecosystem.

Advantages to be gained include further liberalisation of trade, removal of barriers to the services sector as well as enhancement of business environment through regulations relating to intellectual property protection and government procurement practises.

“The establishment of RCEP positions the Asia-Pacific region as the new centre of gravity for global commerce, with total trade expected to increase nearly US$42bil (RM177.18bil).

“And Malaysia is expected to be the largest beneficiary within Asean with a projected US$200mil (RM843.75mil) increase in exports,” Miti forecasted.

Malaysian Chamber of Commerce and Industry in China president Loh Wee Keng said bilateral trade between Malaysia and China hit US$29.45bil (RM124.28bil) in the first two months of this year.

The figure showed an increase of 28.1% compared to the same period in 2021.

As of now, 70% of Malaysian products enjoy zero tariff among RCEP members and the percentage of merchandise would gradually expand to 90% in 10 years.

Malaysian exports to China that enjoy zero tariffs were certain food and beverages, agricultural products such as pepper and machinery spare-parts, among others.

He noted that China’s duty-free exports to Malaysia included seafood products, cocoa, certain machineries and stainless steel items.

“The agreement will help reduce the cost of Malaysian products, greatly increasing their competitiveness in the region,” he said.

Speaking at a virtual RCEP-related seminar to explore collaboration opportunities among industry players of all member nations recently, Loh said Malaysia has a lot more to offer other than agricultural products, and food and beverages – particularly durian and bird’s nest.

“Malaysia also manufactures world-class semi-conductor chips as well as electrical and electronic components and items,” he told the audience.

He was anticipating more regional cooperation in logistics services, digital economy and infrastructural facilities.

With RCEP, he said the time needed for Customs clearance in China has reduced from seven days to about four days.

Malaysia is China’s second-largest trading partner in Asean while China remains as Malaysia’s largest trading partner for 13 consecutive years.