ADBI-JIIA International Symposium on“Current Global Trade Governance: Toward the Next Agenda?”
November 10, 2015

Regional Integration in Asia andChina’s New Trade Policies

Fujitsu Research Institute (FRI)
Senior Fellow
Dr Jianmin Jin
jjm@jp.fujitsu.com

Copyright 2015 FUJITSU RSEARCH INSTITUEAre TPP Rules Threatening China?
 Trade of Goods
・ tariff reduction: China’s 10% tariff (MFNs) is not too high.
Concern over specific goods!
 Access of Investment, Service Market・”Pre-establishment National Treatment” and “Negative List” principles⇒ China have already decided to adopt “PNT” and “NL” principles⇒TPP members predicted to have long negative lists

 Government Procurement: National Treatment is assured, so it will have an impact.
 SOE Rule

・Allows “all TPP members to possess SOEs”, stipulates that “buying and selling to bedone on a commercial basis”, and adds that “public services are excepted.” Also
insures fairness between SEOs and private sector companies.
⇒ Not included in WTO rules, but similar passages found in China’s WTO accession⇒ China is dividing SEOs into 1) public utilities and 2) commercial-based enterprises

 Environmental and Labor Regulations
・ＴＰＰ agreed that environmental and labor standards should not be loosened up inorder to facilitate trade and investment, and to secure basic international treaties⇒ applied regulations as laid out in NAFTA.
Obstruction to free formation of labor unions
1Copyright 2015 FUJITSU RSEARCH INSTITUE

Improved Domestic Governance More
Important than Joining TPP !
76

80

GoodCorruption Index

60

2012

52
38

40

38

2013

2014

Bad38

36

34

31

20

Japan

Malaysia

ThailandIndia

PhilippinesChina

Indonesia

Vietnam

NB: Evaluation of 100 means no corruption, 0 means rampant corruption. Evaluation include
approx 189 countries.

Business Environment Ranking

Evaluation of 189 countries
Ranking: 1 is best, 189 worst

20062010

2013

2014

2015

Bad138

131

130

108
84
34
1225

23

S. Korea

China

Source: Transparency International and World Bank .

90

121

103

Good 49
184
Japan

109

98

India

Malaysia
219
Thailand

VietnamIndonesia

Philippines

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Blueprint for “New Open System” andAsia’s Economic Diplomacy
Nov 2013, 3rd Plenary Session: “Reform Plan” adopted(3 of 60 items related to external economic policy)
Oct 2015, 5th Plenary Session: plan reconfirmed(1） Opening of internal/external investment markets and regulation reform:・Establish experimental free-trade zones domestically・Integrate three foreign capital laws to foreign investment law
・Adopt “Pre-establishment National Treatment” and “Negative List” formats
across the board
・Sign new types of investment agreement (with US, EU, etc.)(2）Acceleration to Signing more FTAs:
・From FTAs with Australia, Korea to China-Korean-Japan FTA,ets(3）Opening up the interior and remote regions:
・“One Belt, One Road” (Silk Road economic belt, naval Silk Road)・Establish developmental financial institutions (AIIB, Silk Road Fund)3

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“Eastern Strategy”(Pacific, Developed Countries Strategy)
 Short term: “Experimental Shanghai Free-Trade Zone”
・Domestic systems based on Negative Lists and Pre-establishment National Treatment⇒ “Foreign Investment Act” (proposed) uses both Negative List andPre-Establishment National Treatment formats⇒ Negative List format to be used countrywide(internal affairs) from Jan 2018

 Mid-term: Investment Agreements with US, EU・For China, investment more important than trade with developed countries(multinational corporation networking)・Allowing US/EU priority access to markets will accelerate investment deals

 Long term: FTAAP and China-EU FTA(China-US FTA?)
・Market integration of China-US, China-EU, and China-Japan

 Regional Policy: From East to West・FTA negotiations with Korea, Australia effectively concluded in 2014, to beenacted at end of 2015.
・China’s FTA network in East Asia nearly complete, excepting Japan.
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FTAs with TPP’s AP Members(except NAFTA and Japan)
USUS

●FTA
○Practical Understanding

As of Oct 2015:△Negotiating

Aus

NZPeruChile

SGMalaysia

Vietnam

Japan

Korea

ChinaIndia

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China’s Stance on FTA with Japan
 China’s trade dependency on Japan, Korea is very low
・21% in 2005 ⇒ 14% in 2015, with exports very low at only 6.0%
・FTAs might unearth regional trade demand Stable framework needed for bringing in foreign capital, technology andM&As with Japan, Korea.
 Japan-China cooperation essential for regional integration.
⇒ Because Japan prioritized TPP, China prioritized FTA with Korea.
Shares of Chinese Exports
Sha re(％)
2220

USA

1816

ＥＵ

14

ＡＳＥＡＮ

1210Japan

8Kor ea

64India

2Source: China Customs

62015.1-92014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

0Copyright 2015 FUJITSU RSEARCH INSTITUE

“Western Strategy” (New Silk Road Strategy)
 “One Belt”: Silk Road Economic Corridor (Central Asia, Russia, Europe)
・Connects to policy for opening the west, hedges risks for energy supply channels
 “One Road”: 21st century naval Silk Road (SE Asia, South Asia, Africa, Europe)
・A more advanced CAFTA, securing safety of sea lanes
 Instead of rule-based approach of FTAs, this sets basic foundation for integration（connectivity） from the start.

EU

Economic Corridor:

RussiaEUC Asia
Mediterranean

China
India
MyanmarBangladesh

PersianGulf

China
W AsiaS AsiaIndianOcean

SEAsiaS China
Sea

Silk Road Economic Belt (“One Belt”)
21st Century Naval Silk Road (“One Road”)

S Pacific

Source: created by the author based on “Silk Road Economic Belt and 21 st Century Naval Silk Road Concept and Implementation”

7

Copyright 2015 FUJITSU RSEARCH INSTITUEPolicy Measures: Financial andIndustrial Cooperation

China’s Planned Use
for Each Tool

High
Short

PrivateCapitalProfitability
Duration

AIIB

SRIF（China）

AIIB（Multi-credit）

SRF
WB, ADB
Low

Silk Road FundLong

Asian Infrastructure
Investment BankAIIB: “World’s Factory” to “World’s Bank”
Equity ratio and voting rights of AIIB member countries
Voting Rights ofAIIB Member Countries

Equity ratio by
AIIB Member Countries
Other
29.13%

China
26.06%

China
30.34%

Other
37.10%England
3.11%

India
7.51%

Brazil
3.24%

India
8.52%

Indonesia
3.42%
France
3.44%

Russia5.93%
England
2.91%

Australia
3.76%

Korea
3.81%

Germany4.57%

Russia6.66%

Brazil
3.02%
Indonesia
3.17%

Germany
4.15%
France3.19%

Australia
3.46%

Korea
3.50%

 Needless fears over decision-making power?
China (AIIB), 26.06％ vs. Japan & US (ＡＤＢ）, 31.244％

 Worries of economic security?
9ＡＩＩＢ（4.9 billion people, ¥4,723 trillion)
vs TPP (800 million people, ¥3,100 trillion)

Source: Chinese Ministry of Finance ets

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Supporting ASEAN in Easing Centrifugal Forces
RCEP Combines 5“ASEAN+1”s

RCEP: ASEAN-led
with support from Japan, ChinaGDP Shares of RCEP Members(2014)
Aus+NZ
7.3%
India
9.1%

Korea
6.3%

China
45.8%

ASEAN10
11.2%
Japan
20.4%

 7 countries also TPP members
 ASEAN not strong enough as anchor!
 India hesitant over “high” liberalization
 China an effective backer?

 Leadership struggle:
Japan (ASEAN+6) vs. China (ASEAN+3)
 ASEAN strikes a balance
10Copyright 2015 FUJITSU RSEARCH INSTITUEAP Regional Economic Integration:
Merging TPP and RCEP into FTAAPRCEP VS. TPP
orＲＣＥＰ＋ＴＰＰ

Share ofPop.
(billion) Global GDP(％)

RCEP(16 countries)
TPP(12 countries)

2011-15 GDP
Growth Rate(％)

In-Region
Trade Rate(％)

TargetYear

TariffReduction
Principles

Leader

3.4

29.2

7.1

44.2

2015

Exceptions
allowed

ASEAN

0.8

36.3

4.2

41.6

2015

No
principles orexceptions

US

11

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12Copyright 2015 FUJITSU RSEARCH INSTITUE