[ASIA]Deepening Cooperation and Continuing to Enhance Regional Economic Integration in East Asia
Author:Zhao Jinping, former Director of the Department of Foreign Economic Research of the Development Research Centre of the State Council and Senior Research Fellow of the Chongyang Institute of Finance, Renmin University of China
Translated from https://mp.weixin.qq.com/s/1OjsQwtuf0-mc0tLhPy4GA
Recently, Premier Li Keqiang delivered a video message at the eighth round of the China-Japan Businessmen and Former Senior Officials Dialogue, saying that China and Japan are inseparable neighbours and are both major economies in the world with extensive common interests and room for cooperation. Maintaining a healthy and stable development of Sino-Japanese relations is in the interests of both sides and is conducive to the well-being of the people of both countries, as well as to peace, stability and development in the region and the world.
This year marks the 50th anniversary of the normalisation of diplomatic relations between China and Japan. 50 years on, Sino-Japanese relations have progressed with the times and Sino-Japanese cooperation has achieved fruitful results. China-Japan cooperation will further deepen bilateral, regional and multilateral practical cooperation under the framework of the Regional Comprehensive Economic Partnership Agreement (RCEP) and promote regional economic integration in East Asia. What new opportunities does China face in East Asia's regional economic cooperation, and what role will Sino-Japanese cooperation play in promoting it? The China Economic Times interviewed Zhao Jinping, a researcher and former director of the Foreign Economic Research Department of the Development Research Centre of the State Council, on related issues.
Regional cooperation in East Asia has become an important factor in leading the long-term stable development of the world economy
China Economic Times: What has been the development of regional cooperation in East Asia in recent years? What important role has China played in it?
Zhao Jinping: In recent years, China's share and influence in global trade has been rising rapidly, especially in the process of deepening regional cooperation in East Asia represented by RCEP, and the role played by China has become increasingly important. This fully demonstrates that in the current process of accelerated evolution of the global economic landscape, regional cooperation in East Asia will become one of the important factors leading the long-term stable development of the world economy under the active promotion of China and other regional members.
At present, countries in East Asia are facing a complex international economic environment, with some countries engaging in the so-called "decoupling and breaking the chain" hype and sparing no effort to try to remove the Chinese factor from the global industrial and supply chain restructuring.
Looking back at the economic development of the East Asian region over the past decades, the economic dependence between China and regional members has gradually increased, becoming an important factor in driving the East Asian region to maintain faster economic growth and long-term stability. Just looking at the changes between 2017 and 2021, exports and imports among RCEP members grew higher than global levels and accounted for a significantly higher share of the world, with China's contribution being the most significant. China's exports and imports to regional member countries have increased significantly as a share of global trade, with China's exports to ASEAN increasing by 0.57 percentage points of global trade and ASEAN's share of exports to China also increasing by 0.25 percentage points, with closer interdependence and an expanded global impact. Artificially severing economic ties between China and the countries would therefore have disastrous consequences for the regional economy and would also have a serious impact on global economic stability.
Japan is an important trading partner of ASEAN and China, and has a very important influence in the economic landscape of East Asia. However, the trade dependence between Japan and the RCEP member countries has declined slightly in recent years, and Japan is faced with the new issue of how to play a positive role in its own economy and regional economic stability by continuing to strengthen cooperation in industrial chains and supply chains with China and other regional member countries in the future.
Huge potential for growth in Chinese direct investment in East Asia
China Economic Times: In your opinion, what new opportunities does China face in the East Asian regional economic cooperation?
Zhao Jinping: In recent years, the economic cooperation and economic trade relations among China, ASEAN and other RCEP members have been gradually deepening, mainly relying on the leading role of mutual investment between the countries, and China's role in these areas is gradually increasing. Over the past 10 years, China's direct investment growth in ASEAN has maintained a high level, higher than China's overall outbound investment level, indicating that Chinese enterprises are accelerating the layout of industrial chains and supply chains in major ASEAN countries, which has played an important role in maintaining and enhancing the resilience of industrial chains and supply chains in China and ASEAN, China and East Asia.
In addition, the long-term stable development of direct investment in China, including Japan, Korea and ASEAN, has also provided an important link to strengthen mutual economic and trade relations. In recent years, despite the impact of the New Crown Pneumonia epidemic, the growth rate of investment has been slightly lower than the average level of China's utilisation of foreign investment, but in the long term, it has also been an important factor in supporting the industrial chain and supply chain between China and East Asian countries.
For China, it will need to play a more important role in maintaining regional industrial chains and supply chains in the future, especially as China has already had a positive impact in enhancing the resilience of regional supply chains in recent years by expanding its outward investment. From the 2021 level, China's outward investment stock has already exceeded the stock of foreign investment attracted by China and become a net global outflow of cross-border direct investment, indicating that China's contribution to global investment growth is gradually increasing and playing an increasingly important role in stabilising regional industrial chains and supply chains. In terms of the ratio of the stock of outward investment to the stock of foreign investment attracted, there is a clear gap between China and Japan, but this has been reversed compared to the US.
However, it should also be noted that there is still huge room for growth in China's outward investment, especially in direct investment in East Asian countries, which will become an important supporting force for the economic integration of East Asia.
Sino-Japanese cooperation will effectively promote the process of regional economic integration in East Asia
China Economic Times: In your opinion, what positive role will Sino-Japanese cooperation play in the process of promoting East Asian regional economic integration?
Zhao Jinping: China and Japan are the first and second largest economies in East Asia, and strengthening cooperation between the two countries in the fields of trade, investment and digital economy will play a very important role in enhancing the resilience of East Asian supply chains and promoting the long-term stability and sustainable development of the regional economy. In particular, against the backdrop of an increasingly complex and challenging international environment and increasing risks and uncertainties in the global economy, the importance of strengthening cooperation between China and Japan is particularly important in order to consolidate the hard-won achievements of East Asian economic cooperation and sustainably improve the level of regional economic integration.
To this end, I would like to make two suggestions. First, China and Japan should work together to promote the implementation of RCEP liberalization and facilitation measures on the ground and follow-up negotiations. This will have a positive impact on accelerating the process of regional economic integration in East Asia and enabling enterprises and people of RCEP members to better share the fruits of regional economic cooperation.
Secondly, we will work together to promote the negotiation of the China-Japan-ROK Free Trade Agreement (CJKFTA), which is based on the "CPTPP+" standard. Nearly 10 years have passed since the start of the negotiations on the China-Japan-ROK FTA, but no substantive progress has been made. After the RCEP comes into force, the CJKFTA needs to move forward with negotiations on higher standards of liberalisation, otherwise the agreement itself will lose its implementation significance. It is worth noting that China has formally applied to join the CPTPP in 2021, and South Korea has now made a similar application, with Japan playing a leading role as an existing member of the agreement. Therefore, the China-Japan-ROK FTA should be benchmarked against the CPTPP, and the tripartite negotiations on this should be advanced, with the aim of forming an agreement above the CPTPP standard. This will enable the early outcome of the China-Japan-ROK FTA negotiations, while accommodating the need for China and South Korea to join the CPTPP negotiations and enhance the efficiency and liberalisation of the negotiations. This will have long-term and far-reaching significance in promoting and leading economic integration in the East Asian region and promoting the development of an open world economy.