China and Malaysia’s contributions to the success of RCEP

CHINA has risen to be the clear frontrunner in the Asian economy. Its economic transformation began in 1978, gaining momentum with trade and investment activities in the early 1990s.

Following its entry into the World Trade Organization (WTO), China has demonstrated its commitment by actively engaging in free trade agreements, notably with Asean nations.

Ensuring a recalibration of the Chinese economy is essential for sustaining its leadership position in shaping the geopolitical and economic landscape of South-East Asia.

The Regional Comprehensive Economic Partnership (RCEP) emphasises the importance of Malaysia's partnership with China in navigating the challenges and opportunities presented by the many trade agreements.

RCEP encompasses a diverse array of 15 countries across the Asia-Pacific, ranging from economic powerhouses like China and Japan to emerging economies such as Vietnam and Malaysia.

With its implementation in 2022, RCEP has become a cornerstone of regional economic cooperation, boasting unparalleled scale and scope.

Notably, Malaysia's enduring partnership with China demonstrates the enduring economic relationships fostered within the RCEP foundation.

This trade agreement, aimed at reducing trade barriers and enhancing market access, holds massive promise for member countries seeking to improve their economic flexibility and enhance competitiveness on the global stage, despite the complexities and overlaps inherent in the “spaghetti bowl effect” or proliferation of trade agreements.

As one of the founding members of Asean, Malaysia aimed to strengthen its trade relationship with China through the standardisation of its rules and regulations to facilitate the movement of goods, funds and people across the region.

RCEP shows a significant geopolitical and economic shift in the Asia-Pacific landscape, with China emerging as a central player in its formulation and implementation.

As the largest trading partner for several RCEP member countries, including South Korea, Japan, Asean countries, Australia and New Zealand, China's influence within the region is undeniable.

RCEP not only serves as a platform for economic cooperation but also plays a crucial role in mitigating geopolitical tensions and fostering harmonious relations on a global scale.

However, it also sets the stage for intense competition among major powers like the United States, China, Japan and India, each competing for dominance in the Asia-Pacific arena.

China's strategic focus on Asean nations, particularly Malaysia, underscores its efforts to assert influence and minimise the dominance of rival powers.

Central to RCEP's objectives is the enhancement of value chains, trade flows and investment opportunities across member countries.

By reducing tariffs on goods, establishing a robust rules-based framework for trade in services, and streamlining non-tariff barriers, RCEP seeks to create an environment conducive to cross-border trade and investment.

This rigorous effort to liberalise trade and promote economic integration holds the potential to unleash significant economic dividends, spurring growth, innovation and job creation throughout the region.

Moreover, by facilitating foreign direct investment (FDI) flows, RCEP aims to accelerate sustainable development and prosperity for member countries, underlining its role as a catalyst for economic transformation.

RCEP includes clauses aimed at benefitting small and medium enterprises (SMEs), aiming to create a fairer competitive environment for Malaysian SMEs and restructure their entry into the broader regional market.

Against the backdrop of deglobalisation trends initiated during the Donald Trump administration in the United States and continued under Joseph Biden, RCEP assumes added significance as a stabilising force in the Asia-Pacific region.

China's leadership, conscious of maintaining peace and stability, particularly among Asean countries, underscores the essential role of economic growth in sustaining regional harmony.

Malaysia's role in the RCEP is pivotal, as a stable environment not only fosters the attraction of foreign investment, but also plays a critical role in facilitating the participation of foreign firms.

These firms, in turn, make substantial contributions to China's overall exports, highlighting Malaysia's importance in ensuring the smooth functioning of regional trade dynamics within the RCEP framework.

Thus, by prioritising regional stability and economic growth, RCEP seeks to counterbalance the forces of deglobalisation and navigate the complexities of the contemporary geopolitical landscape.

In conclusion, RCEP represents a landmark achievement in fostering economic integration and interdependence across the Asia-Pacific region.

With its vast membership, encompassing diverse economies and strategic interests, RCEP holds immense potential to reshape regional geopolitics, spur economic growth and foster greater cooperation among member countries.

By promoting trade liberalisation, enhancing value chains and facilitating investment flows, RCEP is poised to usher in a new era of prosperity and resilience in the Asia-Pacific and beyond.

However, navigating the geopolitical rivalries and ensuring sustainable development will require continued dialogue, cooperation and visionary leadership among member countries.

As RCEP enters into force and begins to exert its transformative influence, its significance as a driver of regional governance and global economic order cannot be overstated.

Dr Hanny Zurina Hamzah is a Senior Lecturer at Universiti Putra Malaysia (UPM). The views expressed here are entirely the writer’s own.

The SEARCH Scholar Series is a social responsibility programme jointly organised by the South-East Asia Research Centre for Humanities (SEARCH) and Tunku Abdul Rahman University of Management and Technology (TAR UMT), in conjunction with the 10-year anniversary of the Belt and Road Initiative.