According to data published by the China Statistics Bureau on July 17th, China’s GDP grew year-on-year by 6.3% in the second quarter, lower than market expectations. China’s recent economic figures have been disappointing. Consumer Price Index (CPI) and Production Price Index (PPI) data continue to worsen, intensifying concerns about deflation. China’s real estate market remains sluggish. Youth unemployment rate hits a new high. Lagging economic recovery raises doubts about whether China will reach its growth target of around 5% for 2023. Apart from domestic consumption and investment, exports are another part of the troika of China's economic growth. Information from China’s General Administration of Customs shows that imports and exports in the first half of 2023 in general met expectations. In particular, the exports of China’s “three new” products, namely electric vehicles, lithium batteries and solar cells, have seen skyrocketing growth since the beginning of 2023, increasing by 61.6% in the first half of this year. This indicates that innovative, low-carbon and green high-tech products are creating new momentum for China’s exports.
China has been actively signing free trade agreement (FTA) with trading partners despite facing the impact of a trade war and COVID-19 in recent years. Up to the first half of 2023, twenty-one FTAs were concluded. Total volume of imports and exports surpassed the mark of 40 trillion yuan for the first time in 2022. China has retained its position as the world’s largest trade in goods nation for six consecutive years. Among multilateral regional economic organizations, the Regional Comprehensive Economic Partnership (RCEP) is composed of 15 signatories with 2.2 billion people and a combined GDP of $26 trillion, accounting for nearly 30% of the world’s GDP and trade volume. The RCEP has formed the largest economic bloc around the globe, and China has assumed a certain degree of leadership. The RCEP officially entered into force for the Philippines on June 2nd and simultaneously took effect for all 15 signatories. Over 90% of trade in goods within the region will ultimately achieve zero tariffs, which will bring trade benefits to member states. Signing the RCEP is instrumental to strengthening China’s economic cooperation and leadership in Asia and increasing the region’s political influence. In particular, as the largest economy in the RCEP, China can play a greater role in the region and has the opportunity to shape rules and standards in the region. This will bring huge dividends to China. According to statistics, China’s exports to the other 14 RECP member states accounted for 30.8% of its total imports and exports in 2022 and kept growing in the first half of this year. The RCEP currently is the world’s largest free trade zone and has the greatest growth potential. Taiwan has yet to join the RCEP. This will affect its export competitiveness.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) held a ministerial meeting in New Zealand on July 16th and completed the UK accession process. The UK becomes the CPTPP’s first new member since its establishment in 2018. The UK’s accession will increase the number of the CPTPP member states to 12. With a combined GDP of more than $14 trillion and accounting for 15% of the total global economy, the CPTPP also has considerable influence. The applications of China, Taiwan, Ecuador, Costa Rica, Uruguay and Ukraine to join the CPTPP are still waiting to be discussed. All of the 11 original CPTPP members have diplomatic ties with China. They also have closer economic and trade relations with China than with Taiwan. Despite Japan’s reservation about China’s accession, China still has a better chance of joining to the CPTPP than the other applicant countries.
It is worth mentioning that China and ASEAN countries have increasingly closer economic and trade relations. According to information from China’s General Administration of Customs, trade volume between China and ASEAN in the first eight months of 2020 reached about 2.93 trillion yuan, accounting for 14.6 % of China's total foreign trade, which made ASEAN China’s largest trading partner. Bilateral trade volume amounted to $975.3 billion in 2022 and is expected to climb to $1 trillion this year. Wang Yi, director of the Office of the Central Commission for Foreign Affairs, said that China and ASEAN will accelerate the negotiations on a Version 3.0 China-ASEAN Free Trade Area (FTA), implement the RCEP across the board and firmly advocate free trade and market openness at the ASEAN-China Foreign Ministers' Meeting in Jakarta on July 13th. China and ASEAN are further deepening cooperation in multiple areas, from China-ASEAN FTA 1.0 to 3.0, from “hard connectivity” to “soft connectivity” and from traditional sectors to digital and green sectors. On the other hand, Taiwan, Japan and South Korea also are actively investing in ASEAN to reduce their dependence on China. Being members of the RCEP, Japan, South Korea and ASEAN have leeway to choose offensive or defensive tactics. However, Taiwan has not signed any trade agreement with ASEAN countries to date and may find it difficult to promote the New Southbound Policy.
(Wo-chiang Lee, Professor of the Department of Banking and Finance at Tamkang University)
(Translated to English by Cindy Li)
