The head of the International Department of the Ministry of Commerce said on March 22, 2021 that China has now completed the approval of the Regional Comprehensive Economic Partnership Agreement, also known as the RCEP Agreement, and has become the first country to ratify the agreement.
In addition, Thailand has also ratified the agreement. All RCEP member states have stated that they will ratify the agreement before the end of this year and promote the agreement to enter into force on January 1 next year.
What is RCEP?
Regional Comprehensive Economic Partnership (RCEP), initiated by the ten ASEAN countries, invites China, Japan, South Korea, Australia, and New Zealand to participate (“10+5”), By reducing tariffs and non-tariff barriers, we will establish a free trade agreement with a unified market among 15 countries. Simply put, RCEP is a super-large free trade zone that leads the world in various indicators. The total population of the 15 member countries reaches 2.27 billion, GDP reaches 26 trillion US dollars, and total exports reach 5.2 trillion US dollars, accounting for about 30% of the global total. On November 15, 2020, the Regional Comprehensive Economic Partnership (RCEP), which has been negotiated for many years, was officially signed. The agreement will cover nearly half of the world’s population and nearly one-third of trade volume. Its members include the 10 ASEAN countries, China, There are 15 parties in total from Japan, South Korea, Australia and New Zealand.
At present, RCEP is the world’s largest free trade zone, covering about 30% of the world’s population, 30% of the total economic volume and 30% of foreign trade. It has broad development prospects and huge potential. Its members All parties have high expectations for RCEP. In the later stage, as RCEP member states gradually ratify the agreement, the structure of the world’s petrochemical industry will also change.
China’s chemical trade deficit and growth changes from 2015 to 2019 China and RCEP member states Trade status
China’s main chemical products imported from RCEP member states and their import volumes from January to October 2020 are based on the Ministry of Commerce’s International Department’s RCEP According to official interpretations, after the agreement takes effect, more than 90% of goods trade in the region will eventually achieve zero tariffs, and China’s final proportion of zero-tariff items promised to the ten ASEAN countries, Australia, and New Zealand will be around 90%. Except for the three least developed countries, Laos, Cambodia, and Myanmar, the corresponding proportions of commitments made by other ASEAN members, Australia, and New Zealand to China are slightly higher than those committed by my country. my country’s final commitment to Japan and South Korea is 86% of zero-tariff items, while Japan and South Korea’s commitment to my country are 88% and 86% respectively. The ten ASEAN countries include Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar, and Cambodia. In 2020, the ten ASEAN countries are my country’s largest trading partners.
According to trade information provided by ASEAN, chemical products have become important trade products between China and major ASEAN countries. my country and ASEAN are highly complementary in the chemical industry. The products that my country imports from ASEAN are mainly primary raw material chemical products, such as primary-shaped plastics, natural rubber and other chemical products. The chemical commodities imported by ASEAN countries from my country mainly include chemical fertilizers, plastic and rubber products, pesticides, ethanol, phosphoric acid, etc. South Korea is an export-oriented petrochemical industry powerhouse with highly developed refining and chemical industries. Its export products account for a high proportion of the total industry production and is one of the largest exporters of petroleum products in Asia. Its petrochemical industry is mainly dominated by large domestic groups in South Korea and has strong competitiveness. For naphtha, light cycle oil, etc., China mainly imports them, and the main source country is South Korea. The import and export of chemical products between Japan and China are highly complementary. The chemical products China imports from Japan are mainly high-end refining and chemical products, among which the largest growth rate is high-performance chemical products such as carbon fiber, while the largest proportion of Japan’s chemical products imported from China are basic chemical products such as plastics. It is stronger than China in terms of high-end refining and fine chemicals capabilities. China’s petrochemical industry-related products imported from Australia are textiles and raw material products. Australia’s main chemical products imported from China are plastic and rubber products, accounting for about 5% of its total imports in 2019. New Zealand mainly imports textiles and raw materials, furniture, toys and miscellaneous products from China, and plastics and rubber also account for a certain proportion. The impact of RCEP on the petrochemical industry
Some scholars have predicted the cumulative impact percentage of RCEP on specific industries in China during the “14th Five-Year Plan” period based on the Global Trade Analysis Model (GTAP) and related data.
Among them, the domestic output of the petrochemical industry (mainly including coking products, petroleum, refined oil, basic chemicals, other chemicals, rubber and plastic products) will be suppressed, with an impact ratio of -0.11%. At the same time, product imports and exports are expected to increase by 2.92% and 1.75% respectively. According to the above data, although RCEP has a positive impact on the import and export trade of products in the petrochemical industry, it is still�It has a stronger promotion effect on imports. At the same time, domestic output will be restrained to some extent in the next few years. This is mainly because the current domestic production capacity is mainly middle and low-end, and the products are highly substitutable. Faced with the gradual rise of the petrochemical industry in ASEAN countries in the next few years, it will be affected to a certain extent; on the other hand, the production technology of high-tech additional products Domestic enterprises still lack production capacity and production capacity. In addition, the main impact of RCEP on the current trade situation comes from Japan and South Korea, and Japan and South Korea are known for exporting high-tech petrochemical products. Therefore, in the next few years, the domestic petrochemical industry will face a more intense competitive environment.
Forecast of the overall impact on China’s petrochemical industry after RCEP takes effect
Yu Biying | Beijing Institute of Technology Energy and Professor and doctoral supervisor at the Environmental Policy Research Center
Member member countries’ tariff reductions on chemicals in my country will help resolve excess production capacity. my country has overcapacity in products such as synthetic ammonia, calcium carbide, polyvinyl chloride and chemical fertilizers. After the agreement takes effect, Japan will be exempt from trade tariffs on my country’s synthetic ammonia and urea, and its tariff on calcium carbide trade will also be directly reduced from the base rate of 2.5% to zero; South Korea’s trade taxes on polyvinyl chloride, calcium carbide and synthetic ammonia will be reduced by its respective The base tax rates of 6.5%, 5.5% and 1% are directly reduced to zero. For fertilizers, the base tax rate of 2% will be gradually reduced to zero within 15 years after taking effect. The direct elimination and gradual reduction of tariffs will be beneficial to the export of these chemical products, thereby helping to resolve excess production capacity.
my country’s tariff concessions on chemicals from other member countries may force industrial upgrading. On the one hand, it can reduce production costs for related downstream industries, and on the other hand, it can bring competitive pressure to chemical manufacturers. However, in the long run, it may force industrial upgrading. For some chemicals that are highly dependent on foreign countries, my country has adopted a relatively conservative tariff policy. For example, for olefins, my country only reduced taxes to zero for Japan and South Korea in the 21st and 10th years after the agreement came into effect; for polyethylene, paraxylene (PX), purified terephthalic acid (PTA) and ethylene glycol For other chemicals, my country has not made any commitments to major trading countries such as Japan and South Korea to reduce or eliminate tariffs. For Australia, it has adopted a longer tax reduction period or slightly lowered the tax rate and maintained it unchanged. This will be To a certain extent, it will slow down the rapid increase in foreign dependence.
Wu Zhiqiao|Polyolefin market researcher at Longzhong Investment Research
Currently China still relies on imported resources for many high-end fine chemicals and new chemical materials, and Japan and South Korea are my country’s main import sources of high-end chemical materials. The signing of RCEP will help domestic downstream companies reduce procurement costs.
In terms of polyethylene, my country currently has a large gap. Even if the new equipment is successfully put into production, imports will still be needed in the short term. In 2021, South Korea, Malaysia and the Philippines will add 3.15 million tons of new polyethylene device production capacity, accounting for 24.4% of the total newly invested capacity. After the agreement comes into effect, it is expected that 65% of South Korea’s goods will implement a zero-tariff policy, which will stimulate its export trade to the greatest extent. Coupled with its superior geographical location, China’s imports of polyethylene products from South Korea are expected to increase, with the new increase expected to be about 780,000 tons. . Malaysia and the Philippines will add more polyethylene production capacity in the future. After the agreement comes into effect, it will also stimulate their exports to China while meeting their domestic needs. The new increases are expected to be 530,000 tons and 48,000 tons respectively.
In terms of ethylene glycol, from January to October 2020, my country’s main import sources from RCEP were Singapore, Japan, and South Korea, with an import volume of 1.326 million tons, accounting for 14.1 %. After tariffs are reduced, imports from member countries are expected to further increase, especially from Singapore, South Korea and Japan. Taking into account the new production capacity of Japan and South Korea, the new increase is estimated to be 930,000 tons. about.
In terms of styrene, from January to October 2020, my country’s styrene imports in RCEP mainly came from Singapore, Indonesia, Japan and South Korea, with an import volume of 870,000 tons, accounting for The ratio is 34.7%. It is expected that after the agreement comes into effect, the above-mentioned countries will also increase their exports to China while meeting their own domestic needs. The new increase is expected to be about 80,000 to 100,000 tons. In the future, my country will put in more new styrene production capacity (an estimated 7.65 million tons will be added in 2020-2021). Japan and Singapore have already exported most of their supply to China, and there are no new production units. Therefore, this part of the import volume will increase in the future. Gradually replaced by domestic products. </p
