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Viewpoints on RCEP & Asian Financial Infrastructure Connectivity
On November 22, 2022, Asian Financial Summit Forum and Asian Financial Think Tank Annual Forum (2022) was successfully held in Beijing. The Plenary Session of this forum is the Parallel Forum of the Annual Conference of Financial Street Forum (2022), with the theme of “RCEP: Embark on a New Journey of Asian Cooperation”, where Asian Financial Cooperation Association (AFCA) was invited to be the co-organizer.
During the Penal Discussion, Mr. Wang Wen, Chief Economist of China Export & Credit Insurance Corporation, Mr. Timur Malikov, Head of the Representative Office of Astana International Financial Centre Authority in Beijing (China), Ms. E Zhihuan, Chief Economist of the Bank of China (Hong Kong) Limited, Mr. Dong Lujun, Vice President, Insurance Association of China, Mr. Zhong Zhengsheng, Chief Economist of Ping An Securities Co., Ltd., Mr. Yap Chi Hui, General Manager of MBB Shanghai and Chief Operating Officer of MBB Greater China, Mr. Richard Benedict Sha So, Executive Vice President and Head of Overseas Banking Group, Metropolitan Bank & Trust Company and Mr. Cheng Shi, Chief Economist and Managing Director of ICBC International elaborated the positive effects of RCEP and Asian financial infrastructure connectivity from different perspectives.
Mr. Wang Wen, Chief Economist of China Export & Credit Insurance Corporation, pointed out that RCEP has for the first time agreed on a higher level of cooperation provisions on intellectual property rights and e-commerce within the region, and included emerging and hot topics under the free trade framework such as competition, small and medium enterprises, and trade remedies. Among them, the annex of financial services in trade in services is a highlight in the RCEP rules, representing the highest level of commitment in finance from most members in the region, and this high level of institutional arrangements and opening-up commitments is conducive to the efficient mobilization of financial resources in the Asia-Pacific region. He pointed out that the future development direction and cooperation path of financial infrastructure construction in the RCEP region mainly lies in the following aspects: First, upholding the basic principles of inclusiveness and openness, seeking common ground while reserving differences, and strengthening the top-level design of regional financial regulation. Second, to strengthen the cooperation of export credit insurance institutions in the region to promote the development of inclusive finance. Third, to strengthen cooperation in digital finance and enhance the efficiency of regional resource circulation.
Mr. Timur Malikov, Head of the Representative Office of Astana International Financial Centre Authority in Beijing (China), believes that financial integration promises higher economic growth, but it also entails new risks. Integrated financial markets allow shocks to spread across borders much more rapidly than in the past. Integration may also introduce risks that are not yet known, as cross-border operations increase the complexity of financial institutions and the difficulty of monitoring their activities. In the face of potential crisis, we need to set clear standards because both countries and financial institutions need to be sure that the cost of a potential crisis will be limited as much as possible through timely intervention based on clear criteria. More convergence and cooperation are also needed in the supervision of large cross-border financial groups. More routine and centralized sharing of information between national supervisors is an essential first step in this. In the meanwhile, the integration of equity market infrastructures, such as clearing and settlement systems, remains incomplete. In his opinion, international financial centers have great potential in the above mentioned area. Although Kazakhstan is not a member of RCEP, Astana International Financial Center, with its infrastructure, special legal and regulatory regimes, and efficient global networking, can promote financial infrastructure connectivity to ensure the access of local businesses to professional financial services.
Ms. E Zhihuan, Chief Economist of the Bank of China (Hong Kong) Limited, made the following suggestions on using the economic and trade rules in RCEP to promote RMB internationalization: First, to further leverage the RCEP regional market opening-up commitments to promote the high-quality development of China's trade and investment and lay the foundation for RMB internationalization in the real economy. Second, use the RCEP rules on investment facilitation and liberalization to promote the upgrading of China's industrial chain, enhance industrial competitiveness and provide a material basis for RMB internationalization. Third, use RCEP to promote the reorganization of rules in the region and build a higher level of open economic system. With the increase in the flow of economic factors in the region, China's economy will further enhance its ability to allocate resources in both international and domestic markets. Fourth, draw upon the opportunity of countries' commitment to financial sector liberalization, to promote financial institutions to go global as an important carrier of RMB internationalization. Fifth, strengthen cross-border financial cooperation with RCEP member countries in the field of digital economy, to provide new impetus for digital currency to become an important infrastructure for each country. Sixth, enhance business environment of the Pilot Free Trade Zone by dovetailing with RCEP. Seventh, play the function of clearing banks to better serve the facilitation of cross-border economic, trade and investment in the RCEP region. Eighth, from the perspective of financial institutions, further play the function of RMB as a currency of denomination and financing currency.
Mr. Dong Lujun, Vice President of Insurance Association of China, believes that the release of RCEP dividends will promote a new era of regional cooperation, mainly in: First, the rapid growth of trade among RCEP member countries. Second, RCEP will inject new momentum for cross-border e-commerce and Silk Road e-commerce cooperation. Third, synergistic development of RCEP and the Belt and Road Initiative. He also said that RCEP will promote a higher level of openness in the insurance industry of each member country. RCEP for the first time introduces new financial services, transfers and processing rules of information in the financial services chapter. RCEP members reach a consensus on the rules of financial services, make a high level of commitment to standardize financial regulation, and enhance transparency. At the same time, the governments of member countries are given flexibility in financial regulatory policies, providing sufficient policy and regulatory space for countries to promote financial openness while preventing financial system instability. In addition, he pointed out that RCEP will also promote the connectivity of financial infrastructure among member countries: First, steadily expand the system-based opening of rules, regulations, management, standards, etc. Second, accelerate the construction of digital "new infrastructure" as the basic technical support. Third, put forward higher requirements for financial risk management.
According to Mr. Zhong Zhengsheng, Chief Economist of Ping An Securities Co., Ltd, trade complementarity is strong among RCEP countries, for each country has different advantageous industries. Thus economic and financial integration is conducive to promoting common development of regional economy. Among them, Japan and South Korea's comparative advantages are concentrated in capital and technology-intensive industries such as machinery and equipment manufacturing, electrical and optical equipment manufacturing, and transportation equipment manufacturing; ASEAN economies' advantages are concentrated in resource and labor-intensive industries such as food, beverage and tobacco manufacturing; New Zealand and Australia's advantages are concentrated in resource-based industries; China's comparative advantages in textile industry, electrical and optical equipment manufacturing are obvious. Therefore, China has a high degree of complementarity with Australia and New Zealand in agriculture and resource-based products, and has a relatively high degree of complementarity with ASEAN, Japan, South Korea in electrical equipment manufacturing and other medium-technology industries. Under RCEP framework, member countries will usher in new development opportunities: China and Japan in the textile and apparel trade; China, Japan and South Korea in the auto parts and light industry export trade to ASEAN, South Korea, ASEAN in the whole car and auto parts export trade. He said that RCEP policy dividends have already began to appear this year: First, it obviously promotes the development of regional trade. Second, it effectively reduces the trade costs of foreign trade enterprises. Third, its supportive role to China's exports is significantly strengthened. Fourth, its positive role in stabilizing foreign investment as well as the supply chain.
Mr. Yap Chi Hui, General Manager of MBB Shanghai and Chief Operating Officer of MBB Greater China, said that China has been Malaysia's top trading partner for 13 consecutive years since 2009. Since the introduction of the Belt and Road Initiative, China's direct investment and construction projects in ASEAN countries have increased by 85%. When RCEP is launched, Malaysia benefits from export trade, especially in oil, gas, palm oil, etc. When talking about how to seize the development opportunities brought by RCEP, he introduced that as a branch of MBB in mainland China, on the one hand, it will follow the strategic guidance of the head office and strengthen its investment in personnel training, system construction and product building to be well prepared. On the other hand, it will make use of its cross-border advantages to financially support trade and investment in goods among RCEP member countries. Through credit financing, trade settlement, letter of credit business and other products, the bank provides financial support for companies in China to import and export goods and investments with RCEP member countries. At the same time, it will strengthen internal and external collaboration to promote the cross-border use of RMB.
Mr. Richard Benedict Sha So, Executive Vice President and Head of Overseas Banking Group of Metropolitan Bank & Trust Company, believes that enhanced financial connectivity between China and the Philippines will not only support trade and investment activities, but can also fuel productivity, immunity, and financial inclusivity within the two states. He explained that Metrobank pioneered and proactively reinforced the Philippines’ financial collaboration with China by being the first Philippine bank to offer renminbi- and yuan-denominated banking products in the Philippine market. Under the influence of the Chinese government’s Yangtze River Economic Belt and the Belt and Road initiative, Metrobank China contracted infrastructure projects, and invested in steel plants in the Philippines, Laos, Vietnam and other countries. The Belt and Road Initiative has been a good opportunity for Chinese enterprises to invest in Southeast Asia. However, they may encounter different obstacles before they can get approved of financing from Philippine banks, due to insufficient business information or insufficient credit history. Metrobank China, with its wealth of resources and cross-border financial services products, can provide support to Chinese-funded enterprises. He believes that with stronger economic integration between the two countries, we can fully achieve the potential of each state and harness the dynamism for sustained shared benefits.
Mr. Cheng Shi, Chief Economist and Managing Director of ICBC International, said that the positive effects of RCEP are reflected in two ways: First, RCEP will effectively alleviate short-term stagflationary pressure. RCEP as the world's largest regional trade agreement will promote economic recovery, through tariff reductions and exemptions to effectively reduce regional costs to ease the upward pressure of shocks. Second, RCEP will effectively help cultivate total factor productivity and boost the confidence of high-quality development of the global economy. He pointed out that the demand for international trade has been sluggish in recent years. RCEP came into force as scheduled can be described as swimming against the tide. It forms a fully Asian-led Asia-Pacific economic community, reflects the confidence and determination of all the agreement parties to jointly maintain the multilateral economic and trade system. RCEP significantly lowers the barriers to economic and trade cooperation among members, promotes the free flow of various factors of production in the region, effectively stimulates the economic development vitality of the members, and brings new opportunities to the economic development of the member countries.