With the RCEP, China finally has a seat at the trade and policy table

As the dominant economy in the world’s largest trading bloc, China finally has institutional voice and a chance to establish its preferred rules and standards

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China’s Premier Li Keqiang claps as Chinese Minister of Commerce Zhong Shan holds up the RCEP agreement during the signing ceremony on November 15. Photo: AFP/ Vietnam host broadcaster

Published: 10:00pm, 22 Nov 2020Updated: 10:05pm, 22 Nov 2020

It goes without saying that China’s attraction as a trade pole in Asia will increase relative to that of the United States with the launch of the China-including but (for now) US-excluding Regional Comprehensive Economic Partnership. But the real significance lies in the institutional voice the RCEP will give China.

It’s necessary to view the wider picture around the RCEP launch to understand how this “detail” fits into China’s overall designs. And that means looking back at events over the past decade or more, especially over the past five years.

China’s remarkable economic growth has not been matched by a commensurate increase in Beijing’s policy influence when it comes to determining the rules of the game in areas such as trade, finance and investment. This could change significantly with the launch of the RCEP.

The US was for long the “top dog” not only in terms of economic size but also in terms of institutional clout, and thus, a regional and international standards setter. The privilege this role confers is potentially enormous, yet perhaps not sufficiently well understood.

Access to markets – for goods or for investment and financial transaction – is one thing; creating the rules under which those markets operate is another. The ultimate advantage enjoyed by the US in this regard is the “exorbitant privilege” of issuing the world’s main international reserve currency.

The US has also exerted effective control over the world’s leading multilateral institutions (many of which it was instrumental in creating) including the Bretton Woods twins – the International Monetary Fund and the World Bank – regional development banks such as the Asian Development Bank, plus the World Trade Organisation, World Health Organisation and so on.