Nation's commitments under RCEP will drive transformation and upgrades
As liberalization of trade in services and openness in the services sector are often at the core of high-level international economic and trade rules, China is expected to further open up the sector to the rest of the world to achieve its goal of basically establishing a new system for higher-level opening up of the economy during the 14th Five-Year Plan period (2021-25), industry experts said.
The nation's openness commitments in the services sector under the Regional Comprehensive Economic Partnership agreement, which has taken effect in 11 of its members, will usher in a new era of liberalization in China's services industry to uplift quality development of its services industry and bolster the nation's overall expansion in high-level opening-up, they said.
Signed by 15 Asia-Pacific countries, composed of the 10 member states of the Association of Southeast Asian Nations and their five major trading partners, namely China, Japan, South Korea, Australia and New Zealand, the RCEP agreement forms the world's largest free trade area that accounts for about one-third of global gross domestic product and population.
Removing tariff and non-tariff barriers, the treaty mandates that member countries fully open at least 65 percent of their services sector and ensure transparency of regulations, said a report by Ernst&Young Global Ltd.
It has already come into force in China, Japan, Australia, New Zealand, South Korea and six ASEAN member states, namely Brunei, Cambodia, Laos, Singapore, Thailand and Vietnam. It will become effective in Malaysia on March 18.
"China will definitely fully honor its RCEP commitments to open the market up and strengthen cooperation with other member economies," said Wang Tuo, an associate researcher at the Chinese Academy of International Trade and Economic Cooperation's Institute of International Trade in Services.
"As the nation continues to expand high-level opening-up, it will deepen reforms and pursue greater institutional opening-up, including aligning domestic regulations, management and standards with high-level international ones. Free trade agreement commitments are part of such efforts," Wang said.
Under the deal, Japan, South Korea, Australia, Singapore, Brunei, Malaysia and Indonesia have adopted a negative list approach for services liberalization immediately. With a negative list approach, market access is open to foreign services suppliers unless exceptions have been applied.
Other members have adopted a positive list approach to the scheduling of specific services commitments and have promised to transit to a negative list approach within six years after the agreement enters into force.
China's Ministry of Commerce said the nation's services sector openness commitments under the RCEP are of the highest level among all the free trade agreements it has signed.
Huo Jianguo, vice-chairman of the China Society for World Trade Organization Studies, said the opening-up of the services sector is a key task for China to expand high-level opening-up because openness in the sector, especially in digital trade, is widely considered as an important new growth point worldwide.
The MOC said China's actual use of foreign investment in 2021 surged by 14.9 percent year-on-year to about 1.15 trillion yuan ($180.72 billion), of which the services sector accounted for 906 billion yuan, or around 79 percent of the total.
Corporate data platform Tianyancha said China has about 45 million companies in the services industry, among which about 70 percent were founded within the last five years.
The annual growth rate of newly registered services-related enterprises remained above 15 percent since 2016, while the growth rate of newly registered foreign-funded services enterprises remained above 5.8 percent during the same period.
China's application for joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which represents some of the highest levels of market openness, especially in the services sector, is another major move by China to pursue high-level opening-up, Huo said.
Wang with CAITEC said opening-up in the services sector has become a major focus of China's efforts to expand high-level opening-up. For instance, the negative list for foreign investment has been downsized, especially in the telecommunications and financial sectors, he said.
"Already a major pillar for the national economy, the services sector has ample room for further transformation and upgrades," Wang said. "The fast-growing digital economy, together with the improvement of digital infrastructure, has provided a solid base for technology-driven development and output growth in the services sector, as well as for the expansion of international cooperation in services trade."