SMM News: November 15, 2020, lasted 8 years of "long-distance running", 10 ASEAN countries and China, Japan, South Korea, Australia, New Zealand 15 countries, formally signed the regional comprehensive economic partnership agreement (RCEP).

RCEP is to reduce tariff and non-tariff barriers, establish a unified free market trade agreement among 16 countries (including India), and implement the organizational form of regional economic integration by opening markets to each other among member countries. The 15 member states signed the agreement cover nearly 2.2 billion people. In 2019, the total GDP of all countries reached 26.2 trillion US dollars, accounting for about 1/3 of the global economic output. The intra-regional trade volume reached 10.4 trillion US dollars, accounting for 27.2 percent of the total global trade volume. It is regarded as the largest free trade area in the world.

The smooth signing of RCEP plays an extremely important role in strengthening the economic recovery of various countries after the epidemic and promoting the long-term prosperity and development of the region. The process of trade liberalization has been further accelerated, and the preferential results of the agreement will also directly benefit consumers and industrial enterprises, and play an important role in enriching consumer market choices and reducing trade costs of enterprises.

The export of Chinese air conditioners to RCEP countries has increased steadily, with a share of more than 20%.

In terms of the air conditioning industry, China is the world's largest producer and seller of air conditioners, accounting for more than 80% of the world's capacity and output. The export of household air conditioners in China has maintained a trend of year-on-year growth since 2016. Although the export market has adjusted somewhat and declined slightly in the cold year of 19, under the circumstances of the epidemic and the unsatisfactory external economic environment this year, there has still been a small rise that exceeds expectations, which further highlights the global status and importance of China's air-conditioning manufacturing, and also proves that the tide of global trade and globalization is unstoppable.

The scale and year-on-year growth of RCEP exports of Chinese household air conditioners in 2020 (10,000 units,%)

According to the online data of the industry, Japan is the largest RCEP exporter of Chinese household air conditioners in 2020, with an export volume of 4.919 million units. In the past two years, the scale of exports to Japan is relatively stable. It is worth mentioning that the RCEP is also the first time that China has reached a bilateral tariff concession arrangement with Japan, and the Sino-Japanese free trade agreement is expected to be further enhanced on the basis of RCEP in the future. At the same time, Japan, as the third largest economy in the world, is developing rapidly, and Japan's import and export market also has great prospects. With the exception of Japan, the Philippines, Laos and Cambodia, other countries have achieved varying degrees of growth, of which Thailand led the increase, an increase of 79.3% over the same period last year.

In addition, the proportion of China's household air conditioners exported to RCEP countries has also shown a trend of steady expansion. In the cold year of 2020, China exported a total of 12.784 million household air conditioners to RCEP countries, accounting for 22.7% of the world. The Asia-Pacific region has a large population, economic development, climate and environment and other factors make it have great growth potential and become an important export target area. Therefore, the signing of the RCEP agreement will also be conducive to the expansion of household air conditioning brands in this region and promote the development of China's household air conditioning export market.

Impact of tax rate change

The adjustment of tariffs has a great impact on the industry or enterprises. Nowadays, the phenomenon of "anti-globalization" and trade protectionism in some countries or regions has become increasingly prominent, and the uncertainty of the global economy has further increased. In order to support local manufacturing, many governments restrict or raise import barriers and raise tariffs on air conditioners.

From the perspective of the main contents of the RCEP, the agreement covers not only market access for trade in goods, trade in services, and investment, but also 20 chapters such as trade facilitation, intellectual property rights, e-commerce, competition policy, and government procurement. The most noteworthy point is tariff. After the entry into force of the agreement, tariff concessions among member states will be reduced to zero tariff immediately and to zero tariff within ten years. Some tax-free concessions are provided for the rest of the dutiable products.

FORM E is a preferential certificate of origin of the China-ASEAN Free Trade area. The original and second copies of the certificate shall be provided by the exporter to the importer for customs clearance in the importing country.

At present, from what we know about the RCEP countries' taxation on China's air-conditioning exports, more than half of the countries, including Japan and Australia and other developed countries, basically do not levy taxes (some countries need preferential certificates). Tariffs in Vietnam and Cambodia are at a relatively high level, both at 15 per cent, and the tax rates need to be further reduced. Countries such as Thailand, Myanmar and South Korea all tax Chinese air-conditioning exports at less than 10%, so it is easier for these countries to further reduce tariffs to zero because of the RCEP agreement. At present, the adjustment of the tax rate of air-conditioning products in various countries has yet to be further confirmed, but it can be predicted that after the formal implementation of RCEP, China will also benefit from it with its huge manufacturing capacity and consumer market.

The landing of RCEP brings benefits to the long-term development of the air-conditioning industry.

Under the RCEP agreement, the tariff adjustment of various countries is gradual, and it will take some time for the formal implementation of the RCEP agreement. Therefore, in the short term, the signing of the RCEP agreement will not have much impact on China's household air conditioning export market, but there is no doubt that it will bring benefits to the long-term development of the air conditioning industry.

1. We will speed up the transformation and upgrading of industries. The signing of RCEP is bound to intensify the competition with Japan, South Korea and other countries, but on the other hand, the same competition will also force Chinese air-conditioning enterprises to speed up upgrading in products, technology, brands, manufacturing and other aspects, so as to promote the transformation and upgrading of China's air-conditioning industry and enhance the international competitiveness of the industry.

two。 Promote the overseas layout of air-conditioning enterprises. In the face of the fierce competition in the domestic market and the broad prospects of the overseas market, it is a general trend to open up the overseas market. More and more domestic enterprises are laying out the overseas market for household air conditioners. The signing of RCEP not only promotes the internal economic integration in the Asia-Pacific region, but also provides the power for air-conditioning enterprises to lay out the Asia-Pacific market.

3. Improve brand competitiveness. Due to the reduction of tariff level, the production and investment costs of enterprises will be greatly reduced, so the sales price will also be reduced accordingly, while ensuring product quality, relying on price advantages to improve brand competitiveness.

4. Promote the export scale of air conditioners. With the reduction of tax rates and prices in the future, which will stimulate market demand, the export of household air conditioners in China is also likely to rise in a certain scale.