As the world’s largest trade pact, the Regional Comprehensive Economic Partnership (RCEP) is transforming economic alliances and solidifying China’s influence in the Asia-Pacific. While fostering regional cooperation, RCEP also raises critical questions about economic dependence and the shifting balance of global power. Will this agreement redefine the global trade order, or will competing frameworks like IPEF challenge its dominance?
[As ESSA’s Publications Co-Director for 2025, Emily has a keen interest in international business and economics. As an International Business student, Emily combines academic knowledge with a passion for writing to produce insightful and engaging content. As an avid reader and follower of the Economist, with a passion for storytelling, Emily brings a unique perspective to the world of economics and beyond].
The global economic order is shifting, and at the heart of this transformation lies the Regional Comprehensive Economic Partnership (RCEP). Signed in 2020, RCEP is the world’s largest free trade agreement, encompassing 15 nations, including China, Japan, South Korea, Australia, and the ten ASEAN countries. With its provisions to reduce trade barriers, streamline customs procedures, and enhance regional supply chains, RCEP is not just an economic pact—it is a geopolitical manoeuvre that strengthens China’s strategic influence in the Asia-Pacific region.
RCEP: A Game-Changer in Global Trade
RCEP encompasses nearly 30% of global GDP and a third of the world’s population (Asian Development Bank, 2021). By lowering tariffs and facilitating investment among member states, it creates an integrated economic bloc that enhances trade efficiency and competitiveness. Countries such as Vietnam and Thailand stand to gain from increased export opportunities, while service-oriented economies like Singapore benefit from expanded market access (Cheong, 2021).
Beyond economic facilitation, RCEP fosters collaboration between historical rivals like China, Japan, and South Korea, reducing regional tensions and enhancing economic interdependence (Huang, 2020). As trade relations deepen, the likelihood of conflict diminishes, reinforcing China’s role as both a stabilizing force and a dominant trade power in the Asia-Pacific.
China’s Strategic Manoeuvres
In response to escalating geopolitical tensions and trade barriers imposed by Western nations, Chinese corporations have adopted innovative strategies to maintain access to global markets. One such approach involves utilizing non-aligned third countries, such as Singapore and Vietnam, as strategic bases to navigate these challenges. This tactic, exemplified by the concept of “Singapore-washing,” allows Chinese companies to mitigate trade barriers and geopolitical scrutiny by rebranding their identity and operating under the legal and regulatory frameworks of these intermediary nations (Financial Times, 2024).
Additionally, RCEP aligns seamlessly with China’s Belt and Road Initiative (BRI), reducing trade barriers and facilitating the movement of Chinese investments into infrastructure projects across Southeast Asia. Countries with weaker economic structures may become increasingly reliant on Chinese capital, creating an economic dependency that bolsters Beijing’s geopolitical influence (Mohan & Power, 2020).
The U.S. Response: Indo-Pacific Economic Framework (IPEF)
To counter China’s growing influence, the United States launched the Indo-Pacific Economic Framework (IPEF) in 2022. Unlike RCEP, which focuses on tariff reductions and investment facilitation, IPEF aims to establish standards for digital trade, supply chain resilience, clean energy, and anti-corruption measures (Office of the United States Trade Representative, n.d.). As of November 2023, significant progress had been made with the signing of agreements on supply chain resilience, clean economy, and fair economy, which entered into force in 2024 (Wikipedia, 2024).
Despite its strategic ambitions, IPEF faces limitations. Without tariff reductions or market access guarantees, the agreement lacks the immediate economic incentives offered by RCEP. While IPEF aligns with U.S. economic priorities, its non-binding nature and limited trade benefits make it less attractive for many Asian economies (Liu et al., 2021).
Global Trade Dynamics and Future Outlook
The evolving dynamics between RCEP and IPEF underscore a broader shift in global trade patterns. The United Kingdom’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in early 2025, becoming the first European nation to join the Indo-Pacific trade bloc, signifies a strategic pivot towards the Asia-Pacific region. This move aims to enhance post-Brexit trade opportunities, although the projected economic impact remains modest (Financial Times, 2025).
Furthermore, discussions within India regarding potential membership in RCEP highlight the agreement’s growing significance. Despite initial reservations, there is a growing recognition that joining RCEP could bolster India’s manufacturing and export sectors, particularly benefiting small and medium-sized enterprises (Reuters, 2024).
Opportunities and Challenges
For China, RCEP presents numerous economic benefits, including expanded market access and strengthened supply chains (Yap, 2020). The agreement simplifies rules of origin, allowing businesses to source materials from multiple RCEP nations without facing complex regulations. This enhances manufacturing competitiveness and attracts foreign investment to China and its trade partners.
However, smaller RCEP economies face potential risks. Increased competition from more advanced industries could stifle local businesses and deepen economic disparities (Lim, 2021). Additionally, RCEP lacks stringent labour and environmental standards, raising concerns about ethical trade practices (Yap, 2020).
Another critical challenge is economic dependence. Countries like Indonesia and the Philippines, which seek to diversify their economies, may find themselves increasingly tied to Chinese economic policies, potentially limiting their sovereignty (Petri & Plummer, 2020). This aspect of RCEP has drawn international scrutiny, with critics warning of China’s ability to exert long-term influence over the region.
The Future of Global Trade: RCEP’s Lasting Impact
RCEP represents a pivotal shift in the global trade landscape. By fostering economic integration in the Asia-Pacific, it strengthens regional supply chains, boosts investment flows, and consolidates China’s economic leadership. However, it also raises concerns about market competition, economic dependence, and China’s strategic ambitions.
As the U.S. and China continue to compete for global economic influence, the effectiveness of initiatives like IPEF in countering RCEP remains uncertain. What is clear, however, is that RCEP has set a new precedent for trade agreements—one that prioritizes regional cooperation and shifts the balance of economic power eastward.
With global trade at a crossroads, the future will be shaped by strategic alliances, economic dependencies, and the ability of nations to adapt to an evolving economic order. Will RCEP solidify China’s dominance, or will alternative trade frameworks emerge to challenge its influence? Only time will tell.
References
Asian Development Bank. (2021). Regional Comprehensive Economic Partnership in the Asia-Pacific. https://www.adb.org/publications/regional-comprehensive-economic-partnership-asia-pacific
Cheong, I. (2021). Trade policy and economic implications of RCEP for the Asia-Pacific region. Journal of Asian Economics, 75, 101283. https://doi.org/10.1016/j.asieco.2021.101283
Huang, Y. (2020). China’s economic growth and the Regional Comprehensive Economic Partnership. China Economic Review, 62, 101499. https://doi.org/10.1016/j.chieco.2020.101499
Lim, G. (2021). Economic dependence and sovereignty in the Asia-Pacific: A study of RCEP. Pacific Review, 34(2), 293-315. https://doi.org/10.1080/09512748.2021.1887086
Liu, J., Li, M., Zhang, L., & Yu, M. (2021). A comparative analysis of RCEP and IPEF from the China-U.S. competition. Modern Economics and Management Forum, 3(4), 102-115. https://doi.org/10.32629/memf.v3i4.1029
Mohan, G., & Power, M. (2020). Understanding the Belt and Road Initiative: A study of the evolving dynamics. Journal of Contemporary China, 29(122), 292-307. https://doi.org/10.1080/24761028.2019.1691703
Office of the United States Trade Representative. (n.d.). Indo-Pacific Economic Framework for Prosperity (IPEF). https://ustr.gov/trade-agreements/agreements-under-negotiation/indo-pacific-economic-framework-prosperity-ipef
Petri, P. A., & Plummer, M. G. (2020). RCEP: A new trade agreement that will shape global economics and politics. Brookings Institution. https://www.brookings.edu/research/rcep-a-new-trade-agreement-that-will-shape-global-economics-and-politics/
Ravenhill, J. (2021). The Regional Comprehensive Economic Partnership: Impact on Southeast Asia. Asian Survey, 61(3), 567-590. https://doi.org/10.1525/as.2021.61.3.567
Ulfah Alifia, & Sheila Alifia. (2023, June 17). The United States is losing the multilateral economic game. East Asia Forum. https://eastasiaforum.org/2023/06/17/the-united-states-is-losing-the-multilateral-economic-game/Yap, J. T. (2020). Challenges and opportunities of RCEP for ASEAN member states. ASEAN Economic Bulletin, 37(1), 29-47. https://doi.org/10.1355/ae37-1b
