The Impact Of RCEP On The Quality Of China’s Inward FDI

In 2020,After the outbreak of the COVID-19,global economy was damaged,increasing the trend of economic anti-globalization and reducing the amount of global FDI.All reasons have affected the quality of China’s inward FDI.Against this background,15 countries including China had officially signed the RCEP,marking the formal formation of the world’s largest free trade zone.Meanwhile,all membership agreed to retain India’s negotiation progress of the RCEP.RCEP covers a wide range of topics.Its implementation will significantly reduce the cost of intra-regional trade and investment,increase regional trade and investment,as well as strengthen trade and investment links among member countries.Thus,research about the RCEP has a great significance to improve the quality of China’s inward FDI.This article first analyzes and evaluates the quality of China’s inward FDI.Evaluate the overall quality of inward FDI in China from 2000 to 2021 and the quality of inward FDI in various provinces by selecting four indicators: FDI’s project scale,source structure,industrial distribution,and technical level of the source enterprises.Secondly,to study the impact of the RCEP on the quality of China’s inward FDI.On the one hand,the implementation of the relevant provisions in the RCEP will directly affect the quality of China’s inward FDI.The intellectual property provisions will improve China’s intellectual property protection level;Competition relevant provisions will improve the degree of marketization of China;Investment relevant provisions will improve the degree of investment openness;Trade in goods provision will affect the degree of China’s commodity trade openness.These will affect the four evaluation indicators of the quality of China’s inward FDI,thereby becoming the influencing factors of the quality of China’s inward FDI.On the other hand,after the RCEP takes effect,it expands the size of the Chinese market through trade creation effects,trade transfer effects,and big market effect,increasing inflation and labor costs,thereby affecting the evaluation indicators of the quality of China’s inward FDI then affecting the quality of China’s inward FDI.Finally,empirical analysis will be conducted on the direct and indirect impacts of RCEP,respectively.The direct impact empirical evidence first uses Regression Discontinuity in Time model to prove that RCEP has improved China’s level of intellectual property protection,marketization,and investment openness,while reducing China’s trade openness.The Panel Data Regression result shows that the level of intellectual property protection,marketization and investment openness are positive factors affecting the quality of China’s inward FDI.Trade openness is a negative influencing factor on the quality of China’s inward FDI.Overall,it can be concluded that after the RCEP came into effect,China’s level of intellectual property protection,marketization,investment openness have increased,trade openness has decreased,promoting the quality improvement of China’s inward FDI.The indirect impact empirical part first use GTAP to simulate tariff policies and find that under both scenarios of India’s accession and non-accession,RCEP would expand China’s market size,increase domestic inflation level and labor costs.At the meantime,the impact of RCEP is greater in the context of India’s accession.Then,the Panel Data Regression model proves that market size,inflation level and labor cost are the positive factors affecting the quality of China’s inward FDI.Based on the results of GTAP and Panel Data Regression model,it is concluded that RCEP will expand China’s market size,increase labor costs and inflation level,promoting the quality of China’s inward FDI.At the same time,if India joined RCEP,the promotion effect of RCEP on the quality of China’s inward FDI will be more significant.As a result,the paper puts forward four policy recommendations.First,expand the amount of inward FDI in high-tech industries with RCEP,and improve the technological level of enterprises that inward FDI sources;Second,speed up the transfer of low-cost labor-intensive industries and improve the industrial distribution level of inward FDI;Third,actively urge the implementation of tariff policies in the RCEP region and improve the source structure of inward FDI;Fourth,China take the lead in advocating India’s return to RCEP so to expand the positive impact of the RCEP on the quality of inward FDI.