BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/42
China did not participate in the US-led TPP-negotiations. Instead, it has tried to push for a more modest Pacific Rim free-trade zone and bilateral arrangements. It remains unlikely that China will sign on to the TPP agreement any time soon as it is unwilling to commit to TPP terms such as those affecting state-owned enterprises, right of workers to organise, protection of intellectual property and Internet censorship. Even without participating, the TPP agreement affects China in many ways, because companies must make their investment decisions in light of opportunities created by the new free-trade zone. A free-trade agreement will increase trade and production in the Pacific Rim area, which should thus benefit China and other non-signatory countries. On the other hand, TPP channels trade and production investment to the free-trade zone members, weakening China’s position as a destination for industrial investment and its role in international production chains.
Many observers have characterised the goals of TPP countries and China as conflicting and speculated how China might respond with its own projects (e.g. Silk Road and AIIB) to meet the challenges of the new free-trade area. From another perspective, however, it is clear that TPP brings new norms to global trade that China, too, should adopt. TPP membership would comport well with China’s long-term opening-up policy, which led to China’s last major trade advance with its WTO accession in 2001.