China has been building more ocean shipping containers and partnerships to seal more free trade deals with other economies. On Nov 15, it joined 14 other countries to sign the Regional Comprehensive Economic Partnership agreement.
My bet is, these developments will lead regional blocs and associations such as the European Union, the African Union and the Gulf Cooperation Council to further reinforce economic and trade ties with China during its 14th Five-Year Plan period (2021-25).
Even though the COVID-19 pandemic has exerted long-term pressure on the global job market, trade and cross-border activities, the rigid two-way goods demand between China and Europe has not only raised the service frequency and trade value of the China-Europe freight train services but also accelerated the frequency of talks on the China-EU investment treaty.
These moves will generate the linkage effect on regional economic cooperation amid the pandemic and benefit other economies participating in the Belt & Road Initiative
As the strong purchasing power of Chinese consumers has provided a broader market for EU products this year, the pandemic to a certain extent has pushed the two sides to further realize the magnitude of cooperation in the next phase, which can be achieved through continuous exploration of cooperative potentiality.
The RCEP will also benefit European companies running a large number of manufacturing and service facilities in China, including Louis Dreyfus Co, Volkswagen AG, DHL Express, and Royal Philips NV, as they have already established strong business ties with many member states of the RCEP.
Southeast Asian countries will continue to raise the volume of imports from China as their industrial structures are still highly complementary.
Meantime, with continuous tariff cuts and the coming implementation of RCEP zero tariffs within the next decade, ASEAN countries will hope to import from China a large number of industrial goods, including primary parts, raw materials and auto parts, in order to support their production, supply chains and people’s lives.
Such developments have further improved prospects for future liberalization. Facilitation of regional trade will be an unstoppable trend. It will also drive the reform of the World Trade Organization.
While global trade may recover, cautious optimism should inform Chinese exporters’ moves. The main concern at present is that the high growth rate of China’s exports may slow down a bit because the surging trade value of previous months was mainly due to lockdowns and other pandemic-prevention measures like factory shutdowns in many countries.
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Chinese companies must adopt a cautious approach and continue to carefully observe the changes in the entire global market, despite the recent rebound in China’s foreign trade.
The authorities and companies concerned should be aware that the lag in international rulemaking provides opportunities for a few large countries to act unilaterally and arbitrarily, especially in making new import tariff rules.
This is yet another reminder to the global community that after the pandemic ends, they must restore the multilateral system represented by the likes of the WTO, speed up the formulation of multilateral rules, and resolve thorny issues in global trade ASAP.