New rules to bolster China’s trade, outbound direct investments

The cumulative rules of origin under the Regional Comprehensive Economic Partnership (RCEP) framework will substantially boost China’s foreign trade and outbound direct investment activities in partner countries in the next stage, according to Customs officials.

The cumulative rules are applied when the production process of goods involves different member countries or regions under the same preferential trade agreement.

For instance, once the RCEP comes into effect, a Chinese firm that exports shoes to South Korea will be exempted from tariffs as long as raw material from China, South Korea, Indonesia and Thailand accounts for more than 40% of the final shoes.

Jiang Feng, director-general of the department of duty collection at the General Administration of Customs (GAC), said Chinese companies can actively apply these rules to improve their productivity.

“They can make full use of the resources of the same economic region for production, ” she said.

“It will be easier for the goods to obtain the origin qualification of the contracting countries, and finally enjoy more preferential tax rates and trade treatment.”

The official said competent government branches such as the GAC and the Commerce Ministry have already accelerated domestic preparations for RCEP implementation.

They will discuss specific implementation plans and other guidelines with counterparts from other member countries on March 8.

As many RCEP participants pledged that they will expedite the pact’s implementation procedures to help companies from all sides share the benefits as soon as possible, the GAC said substantive progress has been achieved in the technical preparations for implementing the cumulation provisions of the rules of origin.

As much as 85% of the 701 binding obligations stipulated in the agreement had been enforced by the end of January.

After the RCEP was signed by the 15 participating countries in November, China sealed 19 free trade agreements (FTAs) with other countries and now has 26 free trade partners, she said.

After the implementation of the RCEP, China’s foreign trade volume with its FTA partners will increase from 27% to 35%, indicating that more than one-third of its foreign trade goods will be tariff-free.

The RCEP pact is expected to add US$500bil to global exports and increase the national income of participating countries by US$186bil by 2030, according to the Washington-based Peterson Institute for International Economics.

The RCEP deal is not only about cutting or exempting tariffs, but also specifies the cumulative provisions of rules of origin, said Di Jie, deputy director-general at the GAC’s department of duty collection. 

Source: The Star