RCEP via /r/wallstreetbets #stocks #wallstreetbets #investing


RCEP

No, that's not a ticker. It stands for Regional Comprehensive Economic Partnership, its a new trade pact (<– important parts of this quoted below) between basically every major economy in the Asia Pacific region.

The new free trade zone will be bigger than both the US-Mexico-Canada Agreement and the European Union.

This is what it does. Important parts bolded:

The RCEP is expected to eliminate a range of tariffs on imports within 20 years.

It also includes provisions on intellectual property, telecommunications, financial services, e-commerce and professional services.

But it's possible the new "rules of origin" – which officially define where a product comes from – will have the biggest impact.

Already many member states have free trade agreements (FTA) with each other, but there are limitations.

"The existing FTAs can be very complicated to use compared to RCEP," said Deborah Elms from the Asian Trade Centre.

Businesses with global supply chains might face tariffs even within an FTA because their products contain components that are made elsewhere.

A product made in Indonesia that contains Australian parts, for example, might face tariffs elsewhere in the Asean free trade zone.

Under RCEP, parts from any member nation would be treated equally, which might give companies in RCEP countries an incentive to look within the trade region for suppliers.

Meaning new markets for financial services and e-commerce for companies within the bloc.

But another thing about this jumped-out at me and it was the recent Anti-trust draft legislation. Its not like the PRC, even the PLA nutjobs, to undermine some of their best companies because they're monopolies.

In context though, what they did makes sense for 2 reasons, none of which are Jack Ma:

  1. Biden winning means the possibility for trade-war de-escalation. But that means leverage in various counter-veiling sectors will be important. So China is more able to pressure the US over its monopolies (Google, Amazon, etc.) if they can make the case that they've taken actions to clean-up their own act (even if they don't end-up passing meaningful antitrust legislation).
  2. More importantly was getting this fucking trade deal done. The companies that would potentially benefit from expanding into Chinese markets need to know (or at least believe) that there will be genuine competition at some level rather than just home-field advantage for Chinese companies. So threatening anti-trust legislation to show they're serious and understand the problem could have been what helped finish the deal. But they didn't pass the law yet and the trade deal is done. So there no more incentive for China to put a lot of teeth into the final version, if they ever pass antitrust legislation.

These are the best answers I can come-up with for "why now?" aside from the Jack Ma grudge.

I don't have any positions to post yet but these are what I'm looking at Monday:

Calls on:

BABA

SE

JD

NIO (dunno if you've heard of it)

I know more about geopolitics than I know about markets so I'm interested what effects you all think this is going to have. Is it priced in? Which companies win biggest?

TL;DR – Antitrust draft law might have been head-fake to get RCEP done. Calls on China.

Submitted November 15, 2020 at 05:15PM by quan42069quan
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