Recently, with the signing of the regional comprehensive economic partnership (RCEP), 10 ASEAN countries and 5 countries including China, Japan, South Korea, Australia and New Zealand will jointly promote trade and investment, and also more closely connect China’s textile fabrics with garment manufacturing factories in Southeast Asia.

As a major export trade center for the textile industry, many textile companies in Shengze Town, Wujiang District, Suzhou City expressed that the signing of the agreement is a major benefit.

 

1. The “tariff” that has troubled textile people for a long time is about to drop!

 

The core upgrade measure of RCEP will progressively lower tariffs across many areas in the coming years.

 

According to the China-ASEAN Free Trade Area (CAFTA) signed in 2005, our import tariffs on the six ASEAN countries (Brunei, Indonesia, Malaysia, Myanmar, Singapore, Thailand) have all been reduced to 0% since 2010. Therefore, after the RCEP is signed, the tariffs on most products from the Philippines, Cambodia, Laos, Japan, South Korea, Australia, and New Zealand will gradually drop to 0% in addition to the above six countries.

 

In particular, China and Japan had a zero-tariff agreement on a free trade zone for the first time. According to customs-related export data last year, Japan is a very important textile export market for China. Therefore, China’s textile and apparel industry may benefit most from the implementation of RCEP.

 

2. Reduce the impact of the Sino-US trade war, and the transferred orders are expected to return!

 

The escalating Sino-US trade friction has affected the foreign trade market in recent years, but with the signing of RCEP, this pressure may ease.

 

According to estimates by the Peterson Institute for International Economics, assuming the continuation of the Sino-US trade friction, China’s accession to RCEP will bring an additional USD 100 billion in real national income growth in 2030, thereby offsetting about 30% of the negative impact of the trade friction.

 

Take Vietnam as an example. At present, many products produced by Vietnam using raw materials from China cannot enjoy preferential tax rates when exported to Japan, South Korea, and India. According to RCEP, products produced by Vietnam using raw materials from other member states are still considered to be of origin in Vietnam, and they can enjoy preferential tax rates for export. Then Vietnam’s garment companies can not worry about reducing the import of Chinese raw materials because of the tax rate.

 

In addition to increasing bilateral trade, two-way investment has also been increased. Chinese textile companies in countries such as Vietnam and Cambodia can enjoy tax policies that are more attractive, and have better conditions for local investment. Domestic enterprises can also introduce new technologies and new equipment at more favorable prices to help enterprises transform and upgrade in competition and enhance their brand effect.

 

3. The market may recover next year

Entering the third quarter, China’s domestic textile industry has eased from the “cold winter” in the first half of the year, especially in October, ushering in a round of popularity. However, after entering November, due to the second outbreak of the European pandemic, some countries continued to implement the “blockade” policy. The lack of confidence in terminal consumption led to a decline in investment in the domestic market and the differentiation of enterprises’ orders. However, there are still counterpart companies that have performed well in receiving orders.

 

Of course, there are still many foreign trade companies in the market that the export volume has shrunk significantly this year, ranging from 20% to half. Some foreign trade bosses even stated that no new orders were issued after November, and the market outlook is still under great pressure. The person in charge of a garment fabric export company said: “This year’s orders have been unsatisfactory, especially the previous cooperation orders with Vietnam and Myanmar. Because of the pandemic, only half of the orders have been recovered. I hope the market will improve next year.”

 

Although the pandemic that currently affects the global economy this year has not improved well and the overseas economy has recovered slowly, with the news of the vaccine and the signing of the RCEP agreement, market participants still have certain expectations for the first half of next year.