On January 1, the Regional Comprehensive Economic Partnership (RCEP) came into effect. After the RCEP agreement comes into effect, more than 90% of the trade-in goods among the approved member states will eventually achieve zero tariffs.
Among them, mechanical and electrical products are China’s largest export category, and its export stability plays a pivotal role in the development of China’s foreign trade. Benefiting from policies such as tariff reduction among members, open market access, and the removal of some trade barriers, the trade of China’s mechanical and electrical products with RCEP countries is expected to achieve substantial growth.
The proportion of mechanical and electrical products exported to RCEP countries exceeds 53.8%
Data from the General Administration of Customs show that in 2020, China exported 2.6 trillion yuan of mechanical and electrical products to RCEP countries, accounting for 53.8% of the total exports to RCEP countries in the same period. In the past ten years, the trade volume of mechanical and electrical products between China and RCEP member countries has increased from US$484.9 billion to US$775.5 billion, an increase of nearly 60%, and the average annual growth rate has reached 4.8%, which is higher than the total trade volume of mechanical and electrical products and total merchandise in the same period. level of growth.
According to the RCEP agreement on tariff reduction commitments, the electromechanical industry is expected to further benefit from the RCEP tariff reduction rules, greatly reducing export costs and enhancing the competitiveness of Chinese products in the international market.
RCEP also forms unified regulations in terms of origin accumulation rules, customs procedures, inspection and quarantine, etc. As long as the value-added part of the product in the process of processing belongs to the member states, and the cumulative value-added exceeds 40%, it can enjoy corresponding tariff preferences. The formulation of this rule will effectively promote the minimization of production costs and the optimization of trade efficiency in the region, thereby strengthening the cooperation of industrial chains and supply chains in the region.
For example, a Chinese company produces refrigerators and exports them to ASEAN countries. The production uses components such as compressors made in South Korea, which exceed 60% of the price of the whole machine. If the China-ASEAN Free Trade Agreement is applied, it fails to meet the specified regional value components. More than 40% of the origin standard, exports to ASEAN cannot enjoy preferential tariffs. However, under RCEP, Korean-made compressors can be regarded as the cumulative value of regional origin materials. Refrigerators assembled in China using Korean-made compressors and exported to ASEAN can enjoy preferential tariffs.
“China’s machinery industry has a complete range of categories, Japan and South Korea have strong scientific and technological strength, ASEAN labor costs are low, and Australia and New Zealand are rich in resources. It can be seen that the comparative advantages of RCEP member countries are obvious, which will help to form a strong complementary effect and reduce industrial The comprehensive cost of the chain will play a positive role in stabilizing and strengthening the regional industrial chain supply chain.” Gao Lihong, director of the International Cooperation Department of China Machinery Industry Federation, told the 21st Century Business Herald that the implementation of RCEP has enabled about one-third of the world’s economies to form. Integrated large market, Chinese mechanical and electrical product manufacturing enterprises can further expand the regional industrial scale economy effect by deeply integrating into the large RCEP market.
Lu Jing, deputy director of the Department of International Economics and Trade of Zhejiang University, told 21st Century Business Herald that in order to better seize the opportunity of RCEP, Chinese enterprises should improve their basic industrial capabilities, stabilize the industrial chain of electronic information manufacturing and high-end machinery manufacturing, and promote from the perspective of the entire industrial chain. The division of labor in the emerging electronic industries in East Asia is adjusted and restructured in a direction that is beneficial to China, using the advantages of the large domestic market to form a strong traction on the advanced production factors of Japan and South Korea.
It is worth noting that under the RCEP agreement, China and Japan reached a free trade arrangement for the first time. Gao Feng, a spokesman for the Ministry of Commerce, previously stated that induction cookers, electric ovens, and most mechanical equipment, instrumentation, and auto parts imported from Japan will be gradually exempted from tariffs. At the same time, China’s exports of mechanical and electrical products, instruments and meters to Japan will gradually enjoy zero-tariff treatment. In particular, in 2022, 57% of China’s exports to Japan will have zero tariffs immediately, and at the end of the transition period, China and Japan will eventually enjoy zero tariffs on 88% and 86% of exports, respectively.
At present, the deficit of China’s mechanical and electrical products with Japan mainly comes from the import of automobile products. According to data from the General Administration of Customs, in 2020, China imported a total of 18.14 billion U.S. dollars of automobiles and spare parts from Japan, ranking second in China as the source of imports of such products with a share of 22.9%, second only to Germany’s 29.6% share.
In the process of vehicle production, the cost of parts circulation is the focus of industry enterprises. Under the RCEP agreement, China has pledged zero tariffs on about 65 percent of auto parts.
Gao Lihong pointed out that the implementation of RCEP will reduce the circulation cost of auto parts among member states, and further optimize the regional auto industry chain, thereby enhancing the competitiveness of the Asian vehicle manufacturing industry. To this end, we should take this opportunity to support Chinese auto companies in “going into ASEAN” and strive to cultivate them into strategically important export products in China.
At present, Great Wall Motor, Geely Automobile and SAIC Motor have all entered the Southeast Asian market through investment and construction of factories or mergers and acquisitions. At the same time, countries such as Thailand and Malaysia focus on energy conservation and carbon reduction, and new energy vehicle companies investing in ASEAN also have certain technological and industrial advantages.
Lu Jing said that the comparative advantages of the industrial chains of China, Japan and South Korea are highly complementary, and the supply chain links are highly integrated. Japan can be used as a core technology exporter in the high-tech field, and South Korea can be used as an important supplier of semi-finished products in the fields of semiconductor and memory manufacturing. , which will help China give full play to its industrial digital advantages, connect with key manufacturing countries of RCEP to build advanced manufacturing clusters, focus on domestic industrial chain and supply chain restructuring, and actively use Japan and South Korea to supplement the shortcomings of China’s industrial chain. Shift the appropriate industry gradient to ASEAN at the right time. As China’s comprehensive production costs increase, some labor-intensive manufacturing companies will shift their processing and production links from China to ASEAN countries, which will benefit countries such as Vietnam and the Philippines.
In the face of more mature and high-level internationalized Japanese and Korean mechanical and electrical products, many voices in the industry were worried that some of my country’s medium and low-end mechanical and electrical products would be impacted, and hoped to provide appropriate subsidies and policy support.