China Economic Update: February 2017

From a political perspective, President Trump’s decision to withdraw from the TPP reflected US sentiment against globalisation, particularly in the mid-west rust belt.

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Trading places – China is replacing the United States as the advocate for major free trade deals

  • Anti-globalisation sentiment has been growing in recent years – particularly in advanced economies – culminating in the United States withdrawal from the Trans-Pacific Partnership (TPP). The economic and diplomatic vacuum left by the TPP presents an opportunity for China to exert greater influence over the Asia-Pacific region – a notable shift given China’s exclusion from TPP negotiations and membership – and the rules for global trade in coming decades.
  • China has been expanding its political and economic influence within the Asia-Pacific region in recent years – most notably with the ‘one belt, one road’ initiative announced in 2013 and the establishment of the Asian Infrastructure Investment Bank in 2015.
  • Similarly, China’s exclusion from TPP negotiations encouraged Beijing to promote alternative trade pacts – taking the lead role from late 2012 in negotiating the Regional Comprehensive Economic Partnership (RCEP). The United States is currently excluded from membership, as it requires an existing free trade agreement with ASEAN – something that is unlikely in the current political environment.
  • From a political perspective, President Trump’s decision to withdraw from the TPP reflected US sentiment against globalisation, particularly in the mid-west rust belt. However, this move has handed China an opportunity to increase influence on trade policy across the Asia-Pacific region.

For further details, please see the attached document: