RCEP – the biggest free trade agreement no one has heard of
Published: Mar 2026
How is RCEP reshaping APAC trade flows?
Deborah Elms
Head of Trade Policy
Hinrich Foundation
The Regional Comprehensive Economic Partnership marked the first time some of these countries came together in a trade agreement. It is an example of how diverse countries can work together, despite their political differences. The agreement is starting to nurture intra-Asian trade and encourage firms to complete final assembly in Asia. For decades, goods have been made in Asia, but final production has been completed in markets in the US and Europe. It’s not a perfect agreement, but RCEP makes it more likely that firms will create supply chains in Asia, for Asia, and as tariffs steadily lower, the agreement will become more meaningful for firms over time. CEOs will increasingly think ‘there are benefits in Asia, I should invest in Asia, I should plan for Asian distribution.’
While RCEP is larger in scale, it is often described as less ambitious than the CPTT because it does not include stringent labour or environmental standards, for example. But that doesn’t mean it will stay this way. It is likely to be improved over time and in two years it will unlock more opportunities for trade in services.
Although RCEP has simplified sourcing and supply chains across the region, compliance and IP has got more complex. Compliance around cross-border digital data flows in relation to consumer protection is a particular headache, and companies are also put off by the document’s 500 pages of legal text and 14,000 country specific schedules. But as long as tariffs consistently fall under RCEP, it will get less complicated. At the moment, there still isn’t one tariff across the region, so companies exporting the same product to multiple countries, pay different tariffs in each.
One of the biggest challenges is that many businesses don’t know it exists, so it requires more capacity building amongst smaller businesses particularly. My sense is that a lot of companies are missing the opportunity to save money and missing the opportunity to move into new markets. RCEP came into force just before Covid which then became all-consuming for companies, and the region already has existing trade agreements which creates an additional layer of complexity.
China’s growing manufacturing dominance across the region is also creating tensions because small countries worry about how their immature local industries can compete. Governments aren’t reneging on their commitments, but they are not enthusiastically promoting RCEP either. It’s not just because of China though. RCEP represents 15 diverse countries with diverse interests, some of which are complimentary and some competitive, but I am confident this year RCEP will continue to grow in strength.
Maisie Chong
Head of Trade Singapore, ASEAN and South Asia
Standard Chartered
There has been a clear surge in intra Asian trade, particularly across manufacturing, apparel, logistics and distribution sectors. This momentum reflects the ongoing shift in global supply chains and the ability of companies to move goods across borders with far greater speed and flexibility. Many industries are now tapping regional and domestic networks to source materials efficiently within Asia and sell into neighbouring markets, strengthening their resilience and competitiveness.
Companies began tapping into the RCEP during the pandemic when they needed to source raw materials closer to home and diversify their customer base. Since then, corporates in markets such as Australia and Japan have leveraged RCEP to implement “China+1” strategies – reducing reliance on China while increasing their exposure to ASEAN. The current US tariff regime is providing yet another tailwind, accelerating supply chain shifts and further boosting intra Asian trade. When we ask clients in Asia what share of their exports goes to the United States, some tell us it is as low as 10%.
RCEP is also feeding into payment trends in the region. The shift in trade flows is having an impact on the use of the dollar in payments. ASEAN-based companies trading with each other will increasingly settle in their domestic currency compared to the past when a payment from one ASEAN company to another had to go through the dollar. With US tariffs prompting manufacturers to diversify production footprints, more regional plants are receiving payments directly in local currencies.
RCEP is also fanning the growth in CNY payments. Chinese suppliers are persuading key buyers to pay in RMB across ASEAN and even globally. Standard Chartered is supporting clients in this transition by ensuring access to offshore CNY liquidity pools and helping multinational corporates establish CNY accounts in anticipation of invoicing and receiving payments in CNY. But despite trade growth, local banks remain highly selective when it comes to lending to some industries, and SMEs in RCEP countries still find it difficult to access capital. This has fuelled a sharp rise in supply chain finance (SCF), where large corporates support liquidity constrained SME suppliers. SCF programmes are now a double digit growth area for us.
We are seeing greater innovation and sophistication across trade finance. Longer tenor financing in some fast-growing industries is getting common. Previously capped around 180 days, today it’s not uncommon to see trade financing structures extended to 360 days, or even multi-year financing, depending on the underlying payment terms. Historically, banks offered largely standardised trade products such as letters of credit and guarantees. Today, the growth of regional trade is driving demand for more structured trade solutions. We are excited to support clients with seamless, cross market trade capabilities built around consistent documentation and integrated regional coverage.
Aditya Gahlaut
Head of Global Trade Solutions, Asia
HSBC
Companies in Asia are adapting to the new trade environment. ‘Asia for Asia’ is no longer a slogan: not only is the region home to RCEP but its growing consumer market, thriving digital economy, and deeply rooted supply network make the region an appealing target for Asian firms as well as companies worldwide. A new trade map is shaping up, and Asian companies are dialing up their focus on Asia in their trade strategy. The new trade landscape has made companies realise that they have been leaving value on the table. Companies are now focused on freeing up the value trapped in their working-capital cycle, looking for solutions not only for their own operations but also for their entire supply network. We are seeing huge demand for solutions such as inventory finance, long-tenor-contract monetisation and risk-mitigation solutions.
Tariffs will lead to a change in the direction of travel for trade, which will ultimately lead to a change in the direction of travel for investment. New investments mean capital expenditure, which will generate new demand for traditional trade instruments such as guarantees, as capex cycles typically start with corporates bidding for projects. Multiple themes are emerging, and their throughline is infrastructure. From AI data centres to renewable-energy infrastructure that will power these data centers, from energy transition to the building and upgrading of more traditional infrastructure such as transport and telecoms, there are immense investment and financing opportunities.
Mirza Baig
Global Business Director
LTS Global Solutions
We provide end-to-end supply chain services, based out of the UK. We recently opened our Far East headquarters in Hong Kong out of which we offer a comprehensive suite of services encompassing freight forwarding, supply chain optimisation and logistics consulting. We work with a network of partners globally and our expertise is strongest when it comes to trade and tariffs between Asia and the UK rather than trade solely within APAC markets.
However, trading across Asia has become noticeably more streamlined in recent years, particularly in regions where trade agreements like RCEP have promoted greater harmonisation of rules and reduced tariffs. For clients, this has translated into smoother cross-border logistics and more predictable timelines. In my opinion key improvements have been in the simplification of customs procedures, more standardised documentation requirements and digitalisation of certain regulatory processes.
Overall, these changes reduce administrative hurdles, making it faster and easier for goods to move across borders. Bottlenecks still exist in areas such as inconsistent enforcement of regulations across different countries, port congestion, and limited transparency in some customs processes. These challenges require ongoing attention and collaboration with local partners.
Next question:
“Statistics suggest that payment performance is deteriorating, and late payments are creeping beyond agreed terms. How should treasurers respond?”
