Treble heft

WANG XIAOYING/CHINA DAILY

China-Japan-Republic of Korea economic and trade cooperation currently stands at a crossroads where "stagnation means regression", amid severe shocks from global geopolitical and geoeconomic dynamics. Against this backdrop, advancing trilateral free trade agreement negotiations within the framework of the Regional Comprehensive Economic Partnership and forging a new cooperative framework among the three countries to jointly respond to evolving geopolitical and economic landscapes have become urgent and pressing tasks. But at present, China-Japan-ROK economic and trade cooperation faces several practical challenges.

On the one hand, it is crucial to pay close attention to the declining trend in trade volume among China, Japan and the ROK. In recent years, intra-regional trade among the three countries has fallen from approximately $850 billion in 2021 to about $737 billion in 2024 — a decline of 13.5 percent. Notably, Japan's trade with both China and the ROK has declined particularly sharply, becoming a pronounced weakness in regional cooperation.

On the other hand, China, Japan and the ROK should forge a strategic consensus on economic and trade cooperation. History shows that the more tense and volatile the regional situation becomes, the more urgently China, Japan and the ROK need to establish close and stable economic relations. Currently, the three countries account for over 80 percent of the GDP and manufacturing added value within the RCEP region.

Deepening trilateral economic and trade cooperation is a pragmatic response to shared geopolitical challenges, as it will drive forward Asia's regional economic integration based on the RCEP framework.

Free trade is a critical requirement for China-Japan-ROK economic and trade cooperation, and also serves as the foundation for them to jointly address geopolitical challenges. All three countries have been significant beneficiaries of global free trade and should therefore stand as steadfast defenders of the free trade order. In the face of global upheavals, resolutely advancing the China-Japan-ROK free trade is not only a pragmatic choice to safeguard their own developmental interests, but also a pivotal step in ensuring the security and stability of the regional industry and supply chains and upholding the rules-based free trade system.

It is also essential to advance the China-Japan-ROK Free Trade Agreement negotiations. As the world's second-, fourth — and 12th-largest economies, respectively, China, Japan and the ROK together account for approximately 24 percent of the global GDP and about 38.5 percent of global manufacturing output. A trilateral FTA would not only create more resilient regional growth poles, but also inject much-needed certainty into global trade.

The key lies in anchoring efforts in the RCEP, fully leveraging its provisions and expediting the conclusion of a China-Japan-ROK FTA within the RCEP framework. Data show that Japan and the ROK have relatively high utilization rates of RCEP's rules of origin. Moreover, the RCEP itself represents a cooperation framework better suited to the region's unique characteristics. Whether viewed from the perspective of growth potential or existing cooperation foundations, promptly reaching a high-standard China-Japan-ROK FTA under the RCEP framework is a pragmatic choice.

Furthermore, significant breakthroughs must be achieved in China-Japan-ROK cooperation on trade in services. Data show that in 2023, trade in services accounted for less than 8 percent of total bilateral trade between China and Japan, and between China and the ROK — lower than the global average of around 24 percent. Elevating their services trade as a focal point of trilateral cooperation will not only create the largest growth driver for China-Japan-ROK economic and trade relations, but also serve as a stable anchor for upgrading the RCEP services trade rules and enhancing institutional alignment. Estimates suggest that if the share of services trade among the three countries were raised to the global average, it would generate a market worth over $130 billion.

In this sense, China's vast market represents a crucial enabler for achieving early breakthroughs in China-Japan-ROK free trade.

First, China's economic transformation is enhancing the trend of greater economic and trade complementarity between China and the ROK. It is estimated that by 2035, the share of Chinese households' service-related consumption expenditure in total consumption expenditure will rise from around 45 percent to approximately 55 to 60 percent, unleashing 40 trillion yuan ($5.6 trillion) in new consumer demand. Markets are the world's scarcest resource. China's economic structural transformation will provide a vast market for Japan and the ROK, whose economies are primarily service-oriented.

Second, China's market opening will create significant opportunities for China-Japan-ROK economic and trade cooperation. For example, implementing the Early Harvest Program could accelerate mutual market access in key service sectors such as healthcare, elderly care, vocational education and tourism. In priority areas such as medical aesthetics, culture and tourism, the three countries can establish a unified service quality evaluation system and enhance cross-border mutual recognition of service industry standards. Additionally, China can advance its digital economy cooperation with the ROK by promoting alignment and interoperability in digital infrastructure, rules and standards. This includes jointly developing frameworks for data rights confirmation, certification, pricing, regulation, trading and security, as well as supporting digital economy enterprises in forming industry alliances to foster digital industrial development.

Third, the pioneering roles of Hainan Free Trade Port and Jeju Special Self-Governing Province can be leveraged. This year marks the 30th anniversary of the establishment of the sister-province relationship between Hainan province and Jeju province. Building on their respective openness advantages, Hainan and Jeju should take the lead in establishing a "port-province" common market — serving as a model for a China-ROK common market centered on services — and thereby drive the broader regional free trade process.

The author is the president of the China Institute for Reform and Development. The author contributed this article to China Watch, a think tank powered by China Daily.

The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.