What are the areas of cooperation of the Belt and Road Initiative?

Promoting connectivity of infrastructure and facilities: Boosting infrastructure development to enhance transnational and cross-regional connectivity is a priority area

for cooperation.

Enhancing economic and trade cooperation: China attaches importance to furthering such ties to bring benefits to all, and building a more balanced, equal and sustainable trade system.

Expanding production capacity and investment cooperation: Cooperation in production capacity and equipment manufacturing and mutual investment are two more priority areas of cooperation among the Belt &Road countries.

Expanding financial cooperation: Further cooperation in finance, unimpeded currency circulation, and stronger financing will create a stable financial environment for the Belt and Road Initiative. This will play a positive role in guiding various sources of capital to engage in developing the real economy, in value chain creation, and in promoting the healthy growth of the global economy.

Strengthening cooperation on ecological and environmental protection: China is committed to building a green Silk Road. It applies a green development philosophy to B&R cooperation activities, shares China’s newest ideas, technologies, and practices in the areas of ecological progress, environmental protection, pollution prevention and control, ecological restoration, and circular economy, and actively fulfills its responsibilities on critical issues such as climate change.

Promoting orderly maritime cooperation: The building of the 21st-Century Maritime Silk Road relies on maritime cooperation – the development of maritime trade, economy and connectivity, the building of a number of ports, and the maintenance of a safe and smooth sea passage.

Strengthening cooperation and exchanges in cultural, social and other fields: The Belt and Road, which would have been impossible without the concerted efforts of people from all participating countries, will bring opportunities for trade, tourism, cultural and educational exchanges, and ensure friendly relationships between the countries.

What are the guiding principles on financing the development of the Belt and Road?

(a) Adhere to the inclusive principle of seeking common ground while putting aside differences: the first and most important task for the design of the guiding principles on financing the development of the Belt and Road is to comprehensively consider the characteristics of different systems and different cultural backgrounds of the countries along the Belt and Road, and seek a common system of rules abided by countries along the Belt and Road under mutual understanding and respect.

(b) Adhere to the equitable principle of openness and transparency: we should uphold the equitable principle of openness, fairness and transparency. Each project participant is required to make information disclosure and decision-making transparent, so as to avoid conflicts of interest and intensifications caused by information asymmetry.

(c) Adhere to the relevant principle to take diversified service measures according to local conditions: “location” means characteristics of the geographical environment, cultural environment, economic environment and political environment in the construction of the Belt and Road. This requires considering the relevance, effectiveness and sustainability of the policy and system design for the purpose of practice.

(d) Adhere to the flexible principle of innovation and diversification: the international rule of innovation and integration is the key to the establishment of the new system of investment and financing of the Belt and Road. On one hand, we should innovate the modes of financial services, ensure the quality of services and improve the efficiency of services. On the other hand, we should innovate the supplies of financial products, actively bring in social capital, build a bond of cooperation between government and social capital, and release the vitality of social capital.

What are the common economic risks of international engineering projects? How to deal with the risks?

International project investment also faces many economic risks, common economic risks include raw material price increase risk, inflation risk and fluctuation risk of foreign exchanges.

To deal with raw material price increase risk, enterprises need to do “prick locking” for the upstream and downstream supplies in advance, look for alternative raw materials for emergency use, and integrate resources and centralize procurement.

Inflation risk refers to the risk of currency depreciation caused by price rises in the host country. To cope with the risk, enterprises may avoid the risk by means of capital preservation through investment, signing long-term purchase contracts with customers and acquiring long-term liabilities.

Fluctuation risk of foreign exchanges refers to the potential rising or falling risk of the cost, profit, cash flow or market value of the investment enterprises caused by the fluctuation of foreign exchange rate of the host country. In the face of foreign exchange risk, enterprises may select contract currency and add an exchange rate proviso clause and the way to adjust prices or interest rates in the contract. In addition, attention should also be paid to the host government's foreign exchange control policies, which may result in the conversion failure into U.S. Dollars remitted abroad.

I.   PFTZ

What is a Pilot Free Trade Zone?

A Pilot Free Trade Zone is a specific multifunctional zone set up within the territory but outside the customs zone, with preferential tax and special customs supervision policies as the main means and trade liberalization and facilitation as the main purpose. A Pilot Free Trade Zone is a testing ground for comprehensively deepening reform and expanding opening up. In a Pilot Free Trade Zone, a basic system and regulatory model based on the prevailing international rules is formed for the connection with the prevailing rules of international investments and trades, which prompts the systems to become more mature and more established and also transforms the system advantages into governance effectiveness. By advancing the modernization of the governance system and the governance capacity, the business environment will be further optimized, which will stimulate market vitality for building a new open economy of a higher level.

Since 2013, 22 Pilot Free Trade Zones have successively been set up in in Shanghai, Guangdong, Tianjin, Fujian, Liaoning, Zhejiang, Henan, Hubei, Chongqing, Sichuan, Shaanxi, Hainan, Shandong, Jiangsu, Guangxi, Hebei, Yunnan, Heilongjiang, Beijing, Hunan, Anhui and Xinjiang provinces in China, which formed an innovative pattern of reform and opening-up spanning the east, west, south, north and middle, and with overall coverage for the coastal, inland and border areas. Over the past ten years, the Pilot Free Trade Zones have connected with the international rules in areas like trade, investment, finance, shipping, and talents, launched a large number of fundamental and pioneering reform and opening-up measures, formed a number of typical and leading institutional innovations, and fostered a number of internationally competitive industrial clusters. Standing at the forefront of China's high-level opening-up to the outside world, they are also actively serving the major regional strategies, the strategy of regional coordinated development and the joint construction of the “Belt and Road”.

What are the differences among Pilot Free Trade Zones, Special Customs Supervision Zones and Bonded Zones?

Pilot Free Trade Zones, Special Customs Supervision Zones, and Bonded Zones are all specific zones set up to promote investment and trade facilitation, but the three differ in terms of the purpose of their establishment, the functional orientation and policy preferences.

A Pilot Free Trade Zone (FTZ) is a testing ground for comprehensively deepening reform and expanding opening-up, with system innovation as the core, it establishes an investment and trade system that connects with the prevailing international rules. By deepening financial openness and innovation, it accelerates the transformation of governmental functions and construction of a new open economy system. A Pilot Free Trade Zone includes both Special Customs Supervision Zones and Special Zones not under Customs Supervision. Some of the Pilot Free Trade Zones include Special Customs Supervision Zones or Bonded Zones as a part of it, creating a policy synergy effect. Taking China (Shanghai) Pilot Free Trade Zone as an example, its scope covers five Special Customs Supervision Zones, namely Shanghai Waigaoqiao Bonded Zone, Waigaoqiao Bonded Logistics Park, Yangshan Bonded Port Zone, Shanghai Pudong Airport Comprehensive Bonded Zone, and Jinqiao Export Processing Zone, as well as two zones, namely, Zhangjiang High-Tech Park and Lujiazui Financial and Trade Zone. As economic functional zones regulated by the customs as per national regulations, Special Customs Supervision Zones are approved by the State Council to be set up within customs areas in the People's Republic of China, including Bonded Zones, export processing zones, bonded logistics parks, cross-border industrial zones, bonded port zones and comprehensive Bonded Zones that implement special tax policies and import and export management policies, and has processing and manufacturing, international trade, logistics distribution, bonded warehousing, testing and maintenance, R&D and design, commodity display and other functions. Enterprises in Special Customs Supervision Zones can enjoy policies such as bonded tax, tax exemption and tax refund. Bonded Areas are areas set up by a country's customs or registered with the approval of the customs and subject to the supervision and management of the customs where goods can be stored for a longer period of time. As the earliest special customs supervision zone in China, the functions of Bonded Zones are positioned as "bonded warehousing, export processing and re-export trade". There are special arrangements implemented for tariffs, import and export taxes as well as some supervisory measures, and they are now gradually transforming and upgrading into comprehensive Bonded Zones.

What is a Free Trade Account (FT Account)?

A Free Trade Account (FT Account) is a local and foreign currency account opened by financial institutions based on the client's needs in the Free Trade Accounting Units and under unified rules, which is independent of the existing traditional account system as a special account under the account system of the central bank. FT Account is a tool for realizing the "liberalization of the first line, control of the second line and limited infiltration" of the funds. The "liberalization of the first line" refers to the free transfer of funds among FT accounts (including residents and non-residents), overseas accounts, and non-resident accounts within the territory but outside the customs zone. "Control of the second line" means that the flow of funds between FT accounts and non-FT accounts shall be considered as cross-border businesses for handling and the flow of funds needs to comply with the relevant regulations. "Limited penetration" means that for some of the businesses of the same non-financial institution entity in the Pilot FTA, its fund transfers under the same account name and its other cross-border transactions that meet the regulations can all be handled between its FT account and other bank settlement accounts based on the regulations.

There are five main types of free trade accounts: Free Trade Individual (FTI), Free Trade Foreigners (FTF), Free Trade Enterprise (FTE), Free
Trade
Non-resident (FTN), and Free
Trade
Accounting
Unit (FTU).

What are the open arrangements in the "negative list" of the Pilot Free Trade Zones?

The negative list is an internationally recognized approach to managing foreign investments, a list of industries in which a country prohibits foreign investment or limits the proportion of foreign investment. More than 70 countries in the world have adopted the management models of pre-establishment national treatment and negative list. On this list, the country clearly lists the areas which deny foreign investment or are subject to restrictive requirements, while areas outside the list are fully opened up and enjoy pre-establishment national treatment.

From 2015 to 2020, China has revised the negative list for foreign investment access in the Pilot Free Trade Zones more than once, reduced the number of special management measures on the negative list for foreign investment access to 30 items, and launched a number of major opening-up measures in the areas of finance and automobiles, etc. In 2021, the negative list for foreign investment access in the Pilot Free Trade Zones was further reduced to 27 items, which were an improvement of the management system and an enhancement of precision. It helped boost market vitality and encouraged fair competition. For example, items for manufacturing industry are cleared; in the field of market research, foreign access restrictions are abolished, except for radio and television listening and viewing surveys, which must be controlled by the Chinese party; in the field of social surveys, foreign investments are permitted, provided that the Chinese party's shareholding ratio is not less than 67% and the corporate representative should have Chinese nationality. On March 22, 2024, the Ministry of Commerce issued for the first time the "Special Administrative Measures on Cross-border Trade in Services in the Pilot Free Trade Zone (Negative List)". On March 22, 2024, the Ministry of Commerce issued for the first time the Special Administrative Measures for Cross-border Trade in Services in Pilot Free Trade Zones (Negative List), which came into effect on April 21, 2024, and made liberalization arrangements in the fields of professional qualifications for natural persons, professional services, finance, and culture, and promoted the expansion of liberalization in cross-border services in an orderly manner.

What is the coverage of the China (Shanghai) Pilot Free Trade Zone?

Located in Pudong, China (Shanghai) Pilot Free Trade Zone (PFTZ) is a regional free trade zone set up by the Chinese government in Shanghai and is a free trade zone in China. On September 29, 2013, China (Shanghai) Pilot Free Trade Zone (PFTZ) was formally established, with a total area of 28.78 square kilometers covering four Special Customs Supervision Zones including Waigaoqiao Bonded Zone, Waigaoqiao Bonded Logistics Park, Yangshan Bonded Port Zone and Shanghai Pudong Airport Comprehensive Bonded Zone in Shanghai. On December 28, 2014, the National People's Congress (NPC) Standing Committee authorized the State Council to expand the area of China (Shanghai) Pilot Free Trade Zone to 120.72 square kilometers. The expanded area includes Lujiazui Financial Zone, Jinqiao Development Zone and Zhangjiang High-Tech Park. Among them, Lujiazui Financial Zone covers 34.26 square kilometers in total. It extends from Jiyang Road, South Pudong Road, Longyang Road, Jinxiu Road and Luoshan Road in the east to the Middle Ring Road in the south, and from Huangpu River in the west to Huangpu River in the north. Jinqiao Development Zone covers 20.48 square kilometers in total, from the Outer Ring Green Belt in the east to East Jinxiu Road in the south, Yanggao Road in the west and Jufeng Road in the north. Zhangjiang High-Tech Park covers 37.2 square kilometers, east to the Outer Ring Road and Shenjiang Road, south to the Outer Ring Road, west to Luoshan Road, north to Longdong Avenue. On August 6, 2019, the Lingang Section of China (Shanghai) Pilot Free Trade Zone was formally established. According to the principle of "overall planning and step-by-step implementation", the first start-up area is 119.5 square kilometers, covering Nanhui New Town, Lingang Equipment Industry Zone, Xiaoyangshan Island, and the south side of Pudong Airport.

What are the special policies on new offshore trades in China (Shanghai) Pilot Free Trade Zone?

New offshore international trades mean the trades that occur between residents and non-residents of China, in which the goods involved in the transactions do not enter or leave China's first-line customs area or are not included in China's customs statistics, including, but not limited to, offshore resales, global procurement, commissioned offshore processing, and offshore purchase of goods for contracted works.

On January 24, 2022, the Notice on Issues Related to Supporting the Development of New Offshore International Trades issued by the People's Bank of China and the Foreign Exchange Bureau was officially implemented. The main contents include supporting new offshore international trade businesses based on the needs of innovation and development of the real economy, and realizing integrated management of local and foreign currency for relevant cross-border fund settlement; encouraging banks to improve internal management by implementing client classification, optimizing self-reviewing, and leveling up the services, so as to facilitate cross-border fund settlement for genuine and compliant new offshore international trades, and strengthen risk monitoring and management to prevent the risks from cross-border fund flow.

In June 2023, the Shanghai Pudong New Area Commerce Commission and the Finance Bureau promulgated the "Implementation Rules for Special Development Funds to Support the Development of New Offshore International Trades in China (Shanghai) Pilot Free Trade Zone", which set out specific measures to provide financial support for the enterprises, and clearly defined that the enterprises carrying out new offshore international trade businesses whose place of incorporation and tax residency are all in the Pilot Free Trade Zone are the targets of support, and that certain support will be provided to them based on the degree of their comprehensive contribution to Shanghai in respect of their new offshore international trade businesses.

In February 2024, the Ministry of Finance and the State Administration of Taxation promulgated the Notice on Pilot Implementation of Preferential Policies on Stamp Duty for Offshore Trades in China (Shanghai) Pilot Free Trade Zone and Lingang Section, which exempted the enterprises incorporated in China (Shanghai) Pilot Free Trade Zone and the Lingang Section from stamp duties on their sale and purchase contracts for carrying out offshore resale transactions.

What are the innovative measures in the Lingang Section of China (Shanghai) Pilot Free Trade Zone for promoting international trades?

The Lingang Section of China (Shanghai) Pilot Free Trade Zone (PFTZ) has implemented a series of innovative measures to promote international trades in the recent years, aiming to motivate the development of domestic and foreign trades and raise competitiveness in the international market.

In terms of foreign investment system innovation, the New Area has taken the initiative in expanding the investment and opening-up in the areas of finance, value-added telecommunications and cross-border data flow through the implementation of the first Negative List for Trade in Services in China, which has attracted the implementation of well-known projects such as the Tesla project. In addition, the New Area becomes a pilot zone in the country to cancel the special account for foreign direct investment in RMB capital to promote the free flow of cross-border funds, and has issued the Action Plan for Accelerating the Development of Emerging Financial Industry in Lingang Section to comprehensively facilitate the financial opening-up and innovation.

In terms of innovation in the management of cross-border data flow, the New Area has actively explored the cross-border data flow system and built a data security highland. Through the "Four Ones" promotion mechanism, the New Area has built a series of infrastructures and public service platforms to support the security assessment of cross-border data flow for enterprises. It has also enhanced the capacity of submarine fiber-optic cables to support cross-border data flow.

In terms of digital service platforms, the New Area has set up the country's first "Going Global" public service office, which provides comprehensive services such as cross-border finance, foreign-related insurance and legal services. In addition, the New Area has launched the "New Area Cross-border Pass" platform to support offshore trades, trade in services and digital trades, which are greatly conducive to trade facilitation.

In July 2024, Lingang Section launched the Ten Measures to Further Support the Development of Foreign Investment, spanning a high level of openness, nice ecology for foreign-invested industries, support for elements of foreign investment development, and optimization of foreign investment services, etc. It seeks to create a more open, transparent and predictable business environment to build the Lingang Section into a first choice for international trades and foreign investments.

Through these innovative measures, Lingang Section has not only made remarkable progress in enhancing the facilitation and liberalization of international trades, but also become a useful model and reference for the opening up and innovation of other free trade zones across the country.

What functions does the Shanghai international trade "One-window" have with its electronization?

Since its official launch on June 18, 2014, the Shanghai International Trade "One-Window" has become the local international trade "One-Window" with the largest data processing capacity in the world. At present, Shanghai International Trade "One-Window" has formed 16 major functional modules and 66 special applications about "customs clearance + logistics", "regulation + service" and "foreign trade + finance", which realized full coverage of the procedures for customs clearance and regulation at ports, promoted complete inclusion of international trade-related business processing, served more than 600,000 enterprises, and supported the processing of more than 1/4 of the country's import/export trade volume data; it has engaged with 30 relevant departments and institutions including customs, commerce, transportation, public security, immigration management, market supervision, taxation, ecological environment, trade promotion, the People's Bank of China, foreign exchange management, with 875 items of service functions in 23 major categories. With its one-stop comprehensive service capability, it has basically realized full coverage of law enforcement service functions at ports, and become a digital base for optimizing the business environment of the ports in Shanghai.

The main functions of "One-Window" include, but are not limited to: (1) submission of commercial and transport documents; (2) submission of customs declaration forms and application for clearance; (3) application for business licenses, permits and authorizations; (4) application for veterinary, sanitary and phytosanitary certificates; (5) application for technical standard certificates; (6) application for certificates of origin; (7) arrangement for collection and delivery of goods; (8) electronic payment; (9) digital client service desk; (10) connection to other international trade information portals.

H RCEP and China

What is RCEP?

Regional Comprehensive Economic Partnership Agreement(RCEP) is a large-scale regional trade agreement jointly promoted by ASEAN and its free trade partners, including China, Japan, South Korea, Australia, New Zealand, etc. RCEP was initiated by ASEAN in 2012, and after a total of 31 rounds of formal negotiations over 8 years, the 15 members finally reached an agreement and signed the RCEP on November 15, 2020. On January 1, 2022, the RCEP officially came into force for implementation in Brunei, Cambodia, Laos, Singapore, Thailand, and Vietnam, i.e.the six ASEAN member states, and China, Japan, Australia, and New Zealand, i.e.the four non-ASEAN member states; on February 1, 2022, RCEP entered into force for implementation in South Korea, on March 18, 2022, the RCEP entered into force for implementation in Malaysia; on May 1, 2022, the RCEP entered into force for implementation between China and Myanmar; on January 2, 2023, the RCEP entered into force for implementation in Indonesia; on June 2, 2023, the RCEP entered into force in the Philippines, bringing the RCEP into full force for all of the 15 signatory countries.

RCEP is a modern, comprehensive, high-quality and mutually beneficial large-scale regional free trade agreement consisting of a preamble, 20 chapters (including Initial Provisions and General Definitions, Trade in Goods, Rules of Origin, Customs Procedures and Trade Facilitation, Sanitary and Phytosanitary Measures, Standards/Technical Regulations and Conformity Assessment Procedures, Trade Remedies, Service Trades, Temporary Movement of Natural Persons, Investment, Intellectual Property Rights, Electronic Commerce, Competition, SMEs, economic and Technological Cooperation, Government Procurement, General Provisions and Exceptions, Institutional Provisions, Dispute Settlement, and Final Clauses), and 4 sections of Market Admission Annexes with 56 commitment forms (including tariff commitment forms, specific service commitment forms, commitment forms on investment reservations and measures of nonconformity, and commitments forms on temporary movement of natural persons). The RCEP has expanded the scope of the original “10+1” free trade agreement by including issues such as intellectual property rights, e-commerce, competition, and government procurement as a part of it, as well as by setting forth regulations to enhance cooperation in areas such as small and medium-sized enterprises (SMEs) and economic and technological cooperation. Through wider and deeper opening-up and cooperation, RCEP will promote the steady development of regional economic integration and make greater contributions to regional economic growth and global economic and trade development.

What is the meaning and role of RCEP?

In terms of population and economic aggregates, and total trade in goods, the scale of RCEP members is larger than that of regional trade blocs such as the EU and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). The RCEP, which includes the major economies of East Asia as well as the countries with emerging markets, will promote an integrated large market covering about one-third of the world’s economy, which will become a strong boost to the growth of the regional and global economy.

For China, the establishment of the RCEP free trade zone is a significant progress in the implementation of the free trade zone strategy under the guidance of Xi Jinping’s thought on socialism with Chinese characteristics for a new era. After the RCEP came into effect, China’s trade in goods with the RCEP members has grown significantly, and with the improvement of RCEP’s systems, the formation of a regional integrated large market will unleash a greater market potential, promote China’s opening up and further optimize China’s foreign trade and investment layout, and thus will become an important platform for expansion of China’s opening up in the new era. RCEP will promote various industries in China to participate more fully in market competition, enhance China’s ability to allocate resources in both international and domestic markets, accelerate the formation of new advantages in international economic competition and cooperation, and help China form a new domestic and international double-cycle development pattern. After the signing of the RCEP, China has increased the number of free trade zones and free trade partners, and for the first time signed a free trade agreement with Japan, one of the world’s top ten economies. This is a major breakthrough in China’s implementation of the free trade zone strategy, and will significantly enhance the “leverage” of China’s free trade zone network.

For the East Asia region, the RCEP will play an important role in promoting economic growth, and the establishment of the RCEP free trade zone sends a strong signal that opposes unilateralism and trade protectionism while supporting free trade and maintaining the multilateral trading system, which will help boost the confidence of all parties in economic growth. The RCEP will significantly optimize the overall business environment in the region. By increasing economic and technical assistance to developing and least developed economies, it will gradually decrease the differences in the level of development among the members and significantly enhance the level of regional economic integration in East Asia. The RCEP will further expand market admission in the fields like goods, services and investments among the members, and promote the free flow of economic factors, which will also facilitate the integration and development of the regional industrial chain, supply chain and value chain.

What are the rules of origin of RCEP?

The rules of origin are the standards and methods for determining the origin of imported and exported goods, and are the combination of relevant laws, regulations and rules of a country (region) on the origin of goods. The main contents of rules of origin of RCEP are reflected in Chapter 3 of the RCEP, which consists of a total of 35 articles and 2 annexes that stipulate the substantive criteria for determining the eligibility of goods to obtain the origin qualification, and a complete set of provisions on determining the eligibility of goods to obtain the origin qualification from the criteria of origin and the supplemental rules. A set of provisions on determining the eligibility of goods to obtain the origin qualification have been set. The rules of origin of RCEP are mainly used to determine whether the goods have the eligibility of RCEP origin, and thus whether they can enjoy the preferential tariff treatment of RCEP.

The following three categories of goods can be considered as “goods from the origin”: (1) goods obtained or produced completely in a contracting party, for which the RCEP   specifies 10 cases; (2) goods produced completely with materials from origins, in which all raw materials and components used in the production of the final product have obtained the origin qualification; (3) goods produced by some materials which are not from origins but comply with all the relevant requirements of the corresponding tariff codes listed in the “Rules about Specific Origins of Products” of Annex 1 of the RCEP. The determination of origin qualification of goods also includes some supplementary and auxiliary principles, such as the accumulation rules, minor processing and treatment, minor content, and direct transportation for determination of the origin qualification of goods under the specific circumstances of production and transportation.

In order to enjoy the benefits of tariff concession, trade in goods under REEP has to pass the “three procedures”. First, the trade goods shall be within the scope of products on the RCEP tariff concession list; second, the trade goods must gain RCEP origin qualification; third, the trade goods must meet the procedural requirements for enjoying the benefits of RCEP, including the issuance of certificates of origin, customs requirements for import clearance, and so on.

What are the investment rules of RCEP?

The RCEP investment rules are mainly reflected in the Investment chapter of the RCEP, which is the largest investment agreement in the Asia-Pacific region at present, and is a comprehensive integration and upgrading of the investment rules from the original “5 ASEAN 10+1 Free Trade Agreements (FTAs)”. It has realized shared investment rules and market admission policies. The Investment chapter (Chapter 10) of the RCEP consists of 18 articles and 2 annexes (customary international laws and imposition), which cover the rules and disciplines on the form and scope of investment, treatment of investors, performance requirements, transfers, imposition, compensation, as well as investment promotion, investment facilitation or the like. It has also stipulated the opening-up commitment of each country’s investment fields, which provides a more comprehensive and systematic guarantee to the investors for their investment activities in the RCEP regions.

Through the pre-admission national treatment + negative list, indirect imposition, and prohibition of performance requirements in the RCEP investment rules, more value has been added based on the existing investment agreements among members, which reflects the development trend of high-level international investment agreements. At the same time, the RCEP investment rules have taken into account the differences in the economic development levels of the members and the specific concerns of some members through various ways, such as the prudent establishment of transition periods and reservations for countries, which reflect the flexibility and inclusiveness of the rules.

With regard to the investment dispute settlement mechanism, Chapter 19 (Dispute Settlement) of the RCEP shall apply to disputes between member states arising out of investment matters under the Agreement (SSDS). With respect to investment disputes between investors and host countries (ISDS), Article 18 of the Investment chapter in RCEP provides that “the contracting parties shall hold discussions no later than two years after the date of entry into force of RCEP, ...... and conclude the discussion within three years from its commencement.” In other words, there is currently no specific ISDS provision in the RCEP investment rules, which will be discussed later.

What are the service trade rules of RCEP?       

The Service Trade chapter is the eighth chapter of the RCEP, which includes 25 articles and three annexes, which are financial services, telecommunication services and professional services respectively, as well as the opening-up commitments of each member in the field of service trade. The Service Trade chapter of the RCEP mainly sets out the regulations on national treatment, most-favored-nation (MFN) treatment, market admission, local presence, domestic regulations of service trades, as well as specific commitments for the elimination of restrictive and discriminatory measures on the opening-up of the services sector, which created conditions for the expansion of service trades among member states. In terms of market opening-up commitments, the modes of service trade opening-up are divided into positive and negative lists. All of the 15 member states under RCEP have made opening-up commitments that are higher than the level of the WTO and their respective original “10+1” free trade agreements. The Financial Services Annex represents China's highest level of commitments in the financial sector, which introduced for the first time the rules on new financial services, self-regulatory organizations, and the transfer and processing of financial information, as well as a high-level commitment on transparency in financial regulation. The Telecommunications Annex establishes rules for the non-discriminatory use of the respective telecommunications-related infrastructure and the provision of telecommunications services, and for the first time includes a number of provisions to promote fair competition and protect consumer interests better. The Professional Services Annex makes arrangements for exchanges among RCEP members on the issue of professional qualifications, including strengthening the dialogue among the bodies responsible for recognition of professional qualifications, encouraging consultation among the parties on the qualification, licensing or registration of professional services of common interest, and encouraging the development of shared standards.

What important consensus has been reached on market opening in RCEP?

About trade in goods, after the RCEP comes into force, the tariff for more than 90% of the trade in goods within the regions will eventually be lowered to zero, which mainly includes an immediate reduction to zero and a reduction to zero within 10 years. It is foreseeable that with the implementation of uniform rules like rules of origin, customs procedures, inspection and quarantine, technical standards and other rules, the synergy from elimination of tariffs and non-tariff barrier effect will gradually release RCEP’s trade creation effect and significantly reduce intra-regional trade costs and product prices.

About service trades, in terms of the level of opening-up, all of the 15 members have made opening-up commitments higher than the level of their respective “10+1” free trade agreements. China’s opening-up commitments in service trades have reached the highest level among its existing free trade agreements. On top of the about 100 sectors in China’s WTO accession commitments, 22 services sectors have been further increased in the RCEP commitment, including R&D, management consulting, manufacturing-related services and air transport. Besides, the level of commitments in 37 sectors, such as finance, law, construction, and shipping has also been raised. Other members have made high levels of opening-up commitments in service sectors such as construction, medical care, real estate, finance and transport, which are of key concern to China.

About the investment, all 15 parties have adopted the negative list approach to fulfill high-level opening-up commitments in the areas of manufacturing, agriculture, forestry, fisheries and mining, which has significantly enhanced the transparency of their policies. China’s negative investment list reflects the latest progress of domestic reforms, and it is also the first time for China to make commitments in the form of a negative list in the field of investment under a free trade agreement, which is of great significance to improving the domestic pre-admission national treatment and negative list management system for foreign investment.

In the area of movement of natural persons. The parties have committed that the investors, personnel transfer within the companies, contractual service providers, accompanying spouses and family members, and other types of business people who meet the conditions and are from countries within the region will be granted a certain level of stay permit and enjoy visa conveniences to carry out a wide range of trade and investment activities. Compared with previous agreements, the RCEP extends the coverage of the commitments to all categories of natural persons who may move across borders as provided in the RCEP, such as investors, accompanying spouses and family members other than service providers. The overall level of commitments largely exceeds the level of commitments made by members in the contracting practices of existing free trade agreements.

What are the provisions on intra-regional trade facilitation under RCEP?

Trade facilitation measures under RCEP mainly include customs procedures and measures on trade facilitation, sanitary and phytosanitary measures, and measures about standards, technical regulations and conformity assessment procedures.

In terms of customs procedures and trade facilitation, the RCEP simplifies customs clearance procedures, adopts pre-determination, pre-arrival processing, information technology and other means to promote the efficient management of customs procedures, and where possible, seeks to release the goods like express cargo and perishable goods within six hours of their arrival, which facilitates the development of new types of cross-border logistics such as express delivery, and promotes the rapid customs clearance of fruits and vegetables and meat, eggs, dairy products and other fresh products, as well as the growth in their trades. The overall level has exceeded that of the Trade Facilitation Agreement of WTO.

In terms of sanitary and phytosanitary measures, a series of measures have been formulated to protect life or health of human, animal or plant, and to ensure that these measures do not, to the greatest extent, cause restrictions on trade and do not unreasonably discriminate against other RCEP members. Based on the Agreement on the Application of Sanitary and Phytosanitary Measures, the RCEP has strengthened the implementation of rules on risk analysis, examination, certification, import inspections, and emergency measures.

In terms of standards, technical regulations and conformity assessment procedures, the RCEP has promoted the reduction of unnecessary technical trade barriers in the recognition of standards, technical regulations and conformity assessment procedures, and encouraged the standardization bodies of all parties to strengthen the information exchange and cooperation on standards, technical regulations and conformity assessment procedures. These measures will facilitate the intraregional trade of goods within the regions, reduce trade costs,   shorten logistics period, and further promote the formation of a regional integrated market.

What are the measures to promote the e-commerce development included in RCEP?

The RCEP E-commerce chapter is the first full-coverage and high-level multilateral e-commerce rules achieved in the Asia-Pacific region. The chapter covers a wealth of contents related to the promotion of e-commerce usage and cooperation, which mainly include rules to facilitate paperless trade, promote electronic authentication and electronic signatures, protect the personal information of e-commerce users, protect the rights and interests of online consumers, and strengthen regulatory cooperation for unsolicited commercial electronic messages. In these rules, the RCEP promotes the implementation of paperless trade, and requires that the parties shall endeavour to accept trade administration documents submitted in electronic form as they have the same legal effects as paper versions, as well as the cooperation at the international level to enhance acceptance of electronic versions of trade administration documents. With respect to electronic signatures, RCEP requires that, unless otherwise provided by law or regulation, the legal effect of such a signature shall not be denied solely on the basis that the signature is electronic. The RCEP also permits the parties to determine appropriate electronic authentication technologies and implementation models, and does not have restrictions on the recognition of electronic authentication technologies and implementation models for electronic transactions. It also allows the parties a chance to certify that their electronic transactions comply with laws and regulations relating to electronic authentication, and encourages the use of electronic authentication that supports interoperable functions.   These requirements not only help to increase the transparency of cross-border transactions, but also contribute to the improvement of efficiency and reduction of transaction costs.
In addition, the parties have also reached an important consensus on cross-border information transmission and information storage in the RCEP, which conditionally allowed the free flow of cross-border data and provided a new impetus for the development of cross-border e-commerce in the regions. Meanwhile, it has stipulated exception clauses for public policy objectives and basic security interests, which have increased policy flexibility and retained more regulatory space. This is conducive to the protection of the security of important data and information. These contents will provide institutional guarantees for members to strengthen cooperation in the field of e-commerce, and add to the creation of a favorable environment for the development of e-commerce. It will enhance mutual trust in policies, mutual recognition of regulations and interconnection of enterprises in the field of e-commerce among members, and will also strongly promote the development of e-commerce in the regions.

Does the RCEP preferential tariff treatment apply automatically?

No. At present, China’s preferential tariffs mainly include most-favored-nation treatment tariffs, preferential tariffs under agreements and specific preferential tariffs, and the RCEP tariff preferential treatment is a kind of preferential tariff under agreement. Free Trade Agreements are contracts that grant preferential tariffs on imported goods between countries, and the tariff concessions therein are usually larger than those under WTO most-favored-nation treatment. In contrast to the automatic application under a WTO most-favored-nation treatment, preferential tariffs under free trade agreements do not definitely apply automatically.

According to RCEP rules, if the traded goods are within the scope of products on the RCEP tariff concession list, the importing party shall grant preferential tariff treatment to the goods from the origin based on the certificate of origin. In other words, products produced in China or other RCEP member countries will not be automatically qualified for the RCEP tariff rates. Within the scope of RCEP member countries, exporters shall, by following RCEP rules of origin, determine whether the goods have RCEP origin qualification and whether they can enjoy RCEP preferential tariff treatment. Specifically, the following three categories of goods can be regarded as “goods from the origin”: (1) goods obtained or produced completely in a contracting party, for which the RCEP   specifies 10 cases; (2) goods produced completely with materials from origins, in which all raw materials and components used in the production of the final product have obtained the origin qualification; (3) goods produced by some materials which are not from origins but comply with all the relevant requirements of the corresponding tariff codes listed in the “Rules about Specific Origins of Products” of Annex 1 of the RCEP. On the contrary, in the case where the exporter has not applied for RCEP preferential tariff treatment, the customs of the importing country will automatically apply WTO most-favored-nation treatment if all RCEP members involved are WTO members.

Participating revisers of the 2025 version(Arranged in chronological order of participation):

Zhang Xiao, Member of International Trade and FTZ Professional Committee of SHBA

Ba Fumin, Member of International Trade and FTZ Professional Committee of SHBA

Cui Guanghao, Deputy Director of International Trade and FTZ Professional Committee of SHBA

Geng Xueyuan, Member of International Trade and FTZ Professional Committee of SHBA

Xu Jian, Director of International Trade and FTZ Professional Committee of SHBA

The original work was initiated by the International Trade Business Research Committee of SHBA (later renamed as the International Trade Professional Committee of SHBA, and reorganized into the International Trade and Free Trade Zone Professional Committee of SHBA during the 2024 annual reelection and restructuring) at the 2021 China International Import Expo. It has undergone three revisions in 2022, 2023, and 2024. This draft is updated based on the 2024 revised version of Legal Q&A of International Trade.

Participating revisers of the 2024 version:

Xu Jian, Director of International Trade and FTZ Professional Committee of SHBA, from Shanghai Bright Way Law Firm

Li Chao, Member of International Trade and FTZ Professional Committee of SHBA, from Shanghai Eastao Law Firm

Ba Fumin, Member of International Trade and FTZ Professional Committee of SHBA, from Beijing JT&N (Shanghai) Law Firm

Zhang Wenjing, Member of International Trade and FTZ Professional Committee of SHBA, from Beijing Yingke (Shanghai) Law Firm

Liu Hao, Member of International Trade and FTZ Professional Committee of SHBA, from Shanghai   Shuangchuang Law Firm

Ye Fang, Member of International Trade and FTZ Professional Committee of SHBA, from Shanghai AllBright Law Firm

Li Zhenhong, Member of International Trade and FTZ Professional Committee of SHBA, from Dentons Shanghai Office

Yang Xufeng, Member of International Trade and FTZ Professional Committee of SHBA, from Shanghai Ganus Law Firm

Ren Kang, Member of International Trade and FTZ Professional Committee of SHBA, from Shanghai DigTech Law Firm

Cong Lu, Member of International Trade and FTZ Professional Committee of SHBA, from Shanghai Co-effort Law Firm LLP

Zhang Yuanyuan, Member of International Trade and FTZ Professional Committee of SHBA, from Zhejiang Sunshine(Shanghai) Law Firm

Participating revisers of the 2023 version:

Xu Jian, Director of International Trade Professional Committee of SHBA, from Shanghai Sunhold Law Firm

Ba Fumin, Member of International Trade Professional Committee of SHBA, from Beijing JT&N (Shanghai) Law Firm

Fan Kun, Member of International Trade Professional Committee of SHBA, from Shanghai Excellence Law Firm

Zhang Yanfeng, Member of International Trade Professional Committee of SHBA, from Shanghai Fengjing Law Firm

Li Chao, Member of International Trade Professional Committee of SHBA, from Shanghai Eastao Law Firm

Participating revisers of the 2022 version:

Xu Jian, Director of International Trade Business Research Committee of SHBA, from Shanghai Sunhold Law Firm

Li Chao, Member of International Trade Business Research Committee of SHBA, from Shanghai Eastao Law Firm

Sun Yi, Member of International Trade Business Research Committee of SHBA, from Beijing DHH (Shanghai) Law Firm

Ye Zhenyong, Member of International Trade Business Research Committee of SHBA, from JUN HE LAW OFFICES(Shanghai)

Cui Yutong, Member of International Trade Business Research Committee of SHBA, from Shandong Kangqiao (Shanghai) Law Firm

Fan Kun, Member of International Trade Business Research Committee of SHBA,from Shanghai Excellence Law Firm

Wang Linggang, Member of International Trade Business Research Committee of SHBA, in the middle of transition

Niu Pu, Member of International Trade Business Research Committee of SHBA, from Beijing JT&N (Shanghai) Law Firm

Ge Jinyan, Member of International Trade Business Research Committee of SHBA, from   Shanghai United Law Firm

Cui Guanghao, Member of International Trade Business Research Committee of SHBA, from Beijing Yingke (Shanghai) Law Firm

Participating writers in the original work:

Xu Jian, Director of International Trade Business Research Committee of SHBA, from V&T Law Firm

Ba Fumin, Member of International Trade and FTZ Professional Committee of SHBA

Cui Guanghao, Member of International Trade Business Research Committee of SHBA, from Beijing Yingke (Shanghai) Law Firm

Li Chao, Member of International Trade Business Research Committee of SHBA, from Shanghai Eastao Law Firm

Zhang Yi, Member of International Trade Business Research Committee of SHBA, from Shanghai Jin Mao Law Firm

Shao Dan, Vice Chairman of International Trade Business Research Committee of SHBA, from SGLA Law Firm

Du Yue, Member of International Trade Business Research Committee of SHBA, from Beijing DHH (Shanghai) Law Firm

Sun Yi, Officer of International Trade Business Research Committee of SHBA, from Beijing DHH (Shanghai) Law Firm

Ge Jinyan, Member of International Trade Business Research Committee of SHBA, from   Shanghai United Law Firm

Xu Jie, Member of International Trade Business Research Committee of SHBA, from Beijing DHH (Shanghai) Law Firm

Guo Fengli, Member of International Trade Business Research Committee of SHBA, from Shanghai Leadvisor Law Firm

Cui Yutong, Member of International Trade Business Research Committee of SHBA, from Shandong Kangqiao (Shanghai) Law Firm

Wu Anqi, Member of International Trade Business Research Committee of SHBA, from Dentons Shanghai Office

Tong Zhefan, Member of International Trade Business Research Committee of SHBA, from Shanghai Joint-Win Law Firm

Huang Bing, Member of International Trade Business Research Committee of SHBA, from Capital Equity Legal Group Shanghai Office

Zhuang Jiansheng, Member of International Trade Business Research Committee of SHBA, from Shanghai Hui Ye Law Firm

Zhou Lintao, Officer of International Trade Business Research Committee of SHBA, from Beijing Yingke (Shanghai) Law Firm

Li Yu, Member of International Trade Business Research Committee of SHBA, from Shanghai Nuodi Law Firm

Niu Pu, Member of International Trade Business Research Committee of SHBA, from Beijing JT&N (Shanghai) Law Firm

Li Xiang, Member of International Trade Business Research Committee of SHBA, from Shanghai Xiangshi Law Firm

Yu Guangrong, Member of International Trade Business Research Committee of SHBA, from Shanghai Anzhiqin Law Firm

Li Xinli, Member of International Trade Business Research Committee of SHBA, from Shanghai Landing Law Offices

Liu Jing, Member of International Trade Business Research Committee of SHBA, from Beijing Jingshi (Shanghai) Law Firm