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In October, industrial output rose 6.9% y/y, the same rate as in September, and the highest rate this year, up 2.2 pps from October 2019. The national service production index has been rising since the economic opening in February, and achieved positive growth in May. It rose 7.4% y/y in October, up 2 pps from September, and up 0.8 pps from October 2019. Investment rose 1.8% y/y in October, up 1 pps from September.

Retail sales of social consumption goods recovered further, and were up 4.3% y/y, and up 3.4 pps from Q3. Their real growth was 4.6% y/y, up 5 pps from Q3.Even the pandemic’s hardest-hit restaurant income has avoided a fall, and was up 0.8% y/y.

Price rises tempered amid monetary expansion. In October, CPI growth fell to only 0.5% y/y, mostly pulled down by significant meat price drops. After adjusting for seasonal factors, CPI fell -0.4% m/m. We expect CPI growth to turn from positive to negative next month, and that this will be a trend for the near future. The ex-factory price index of industrial goods fell -2.1% y/y. PPI fell -2.4% y/y. M1 rose 9.1% y/y, up 1 pps from September, and up 5.8 pps from last October, reaching its highest growth rate since February 2018.

In October, exports rose 7.6% y/y, and imports rose 0.9% y/y. Both of their seasonal adjusted growth rates show upward trends. We expect the appreciation of RMB and economic recovery to bring higher import growth.

On November 15th, 2020, 15 countries — members of the Association of Southeast Asian Nations (ASEAN), and Australia, China, Japan, South Korea and New Zealand signed the Regional Comprehensive Economic Partnership (RCEP), arguably the largest free trade agreement in history. This is the first time China has signed up to a regional multilateral trade pact. This is an example of China’s commitment to the greater openness repeatedly advocated by President Xi Jinping. While the trade deal certainly will boost these countries’ economies in the short term, in the long term it is "a victory of multilateralism and free trade," as Prime Minister Keqiang Li put it, in contrast to U.S. President Donald Trump’s trade policy.

Published in 2020 - Macro Outlook
Thursday, 15 October 2020 02:12

Pan-Beibu Gulf Think Tank Summit 2020

Published in 2020 - Events
Tuesday, 19 November 2019 08:12

RCEP Can Give Boost to International Trade

IMG 2555Author: ZhangGuoping, Postdoctoral Researcher, CDI

India’s sudden withdrawal has hit negotiations involving 16 countries of the Regional Comprehensive Economic Partnership treaty, which is expected to conclude this year. The RCEP is a proposed free trade agreement between the countries of the Association of Southeast Asian Nations, and six states with which ASEAN has FTAs.

China needs to remain open towel coming India to join the RCEP whenever it is ready, deepen reform and opening-up to benefit countries entering the Chinese market, and mediate among different countries to ease trade frictions to contribute to the conclusion of RCEP negotiations, which can inject fresh impetus to global trade.

With a population of about 3.5 billion, this trading bloc has a total gross domestic product of more than $21 trillion, accounting for more than 30 percent of global trade. If the RCEP is finalized, it will be the world’s largest regional FTA.

The RCEP is more accessible to developing nations. Its framework complements the World Trade Organization by covering traditional issues such as goods trade, dispute settlement and service trade as well as new ones, including investment intellectual property, digital trade, and finance and telecommunication.

It plans to cut restrictions and discriminatory measures especially in the field of service trade. The RCEP can lay the foundation for developing countries participating in the treaty to get involved in higher FTA levels in the future, which is significant for promoting free trade between member countries in the era of globalization.

Since WTO reforms have not yet been launched, the RCEP will offer great opportunities for global trade, especially for China. Due to factors such as the unilateralism of some major countries, the number of permanent WTO judges has come down from seven to three, with the tenure of one of them concluding by the end of this year.

Participation in the RCEP will be an important approach for China to cope with Sino-US trade frictions and stabilize its foreign trade growth in the short term. In the long term, it is expected to promote China’s high-level opening-up and further its participation in regional integration.

China will further expand its economic and trade partners among the RCEP member countries and make greater contributions for maintaining the prosperity of the Asia-Pacific region.

It will also share its experiences and help RCEP member countries enhance confidence in free trade and combine the RCEP framework with the Belt and Road Initiative to produce joint results.

At present, all parties have reached consensus on more than 90 percent of the agreement text. However, the China-United States and Japan-Republic of Korea trade frictions, and India’s withdrawal, continue to pose challenges.

India has concerns about the potential negative impact of imports and lacks confidence in the competitiveness of the domestic industry. It has filed many anti-dumping cases against China, and has established a complicated non-tariff system to protect the domestic market.

In this regard, China first needs to promote to the member countries to adopt more proactive and pragmatic strategies toward the conclusion of negotiations while respecting ASEAN’s dominant role.

China needs to uphold the principle that the 15 RCEP countries can go ahead with the agreement that is open to India, which reflects China’s openness toward foreign cooperation as well as its determination to adhere to multilateralism and trade liberalization.

Second, some Southeast Asian countries are concerned that domestic markets may bear the brunt of China’s exports once the RCEP treaty is concluded. China needs to further reform and open up, show the huge potential of the Chinese market to enterprises and investors of other countries participating in the RCEP, and encourage countries to invest in China and facilitate RCEP negotiations.

The second China International Import Expo recently held in Shanghai allowed foreign enterprises to see the great returns of tapping into the Chinese market and demonstrated China’s confidence as the world’s largest market. The Foreign Investment Law will come into effect in 2020, when foreign investment and business activities in China will be more secure.

Third, China needs to further play its role as a mediator. Since Japan- ROK economic and trade frictions are showing no signs of easing in the short term, China needs to respect the dominant role of ASEAN while continuing to mediate between countries as a major power and promoting countries participating in RCEP negotiations to adopt more proactive pragmatic strategies, which can turn risks into opportunities, and lay the foundation for future negotiations for the China-Japan- ROK Free Trade Zone and the China-India trade agreement.

In the era of globalization, RCEP member countries need to remain open and inclusive, participate in negotiations proactively and promote regional integration to better cope with challenges caused by anti-globalization and trade protectionism.

As the world’s largest regional agreement, the RCEP will serve as a multilateral cooperation platform for member countries, provide a new approach for countries to address problems, advance cooperation in the Asia-Pacific region and give new impetus to global trade.

Published in 2019 - Insights