Chinese President Xi Jinping has taken the remarkable step of offering free trade with China to members of the Shanghai Cooperation Organization (SCO).
Speaking at the SCO meetings in Astana, Kazakhstan on Friday June 9, Xi said, “We could begin signing agreement on trade facilitation with SCO. We speak in favor of opening cross-border routes in time set by the governments of the SCO member states”.
The SCO is a political, economic, and security group comprising Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. India and Pakistan were formally admitted to the SCO earlier in the day.
The admission of India and Pakistan is notable: the two countries have recently been engaged in hostility along their disputed border, while India recently abstained from the Belt and Road Forum in Beijing due to concerns over Pakistan’s involvement, amongst many other issues.
It is not the first time an agreement of this type has been proposed by China. Beijing is actively negotiating an FTA with the Eurasian Economic Union (EAEU), while Russia has proposed opening up a mega-free trade area that would include the SCO, EAEU, and ASEAN.
“A China-SCO Free Trade Agreement would significantly change the existing global trade flows”, according to Chris Devonshire-Ellis of Dezan Shira & Associates. Further, he said, “the fact that China is pushing for deals on several fronts across Eurasia show that Beijing is very serious about accomplishing its aims and accessing the commodities across the entire region”.
Devonshire-Ellis also commented on how FTAs would help economies in the region complement each other: “Such a deal would also be good for India; China’s middle class need to access inexpensive consumer products, which India is more than capable of manufacturing. Russian agriculture would also receive an economic boom. It should be remembered that China has 20 percent of the global population, but only five percent of its arable land. This is the main driver behind Beijing’s wanting to access the under-developed Eurasian markets and why such deals will almost certainly go ahead in time.”
More broadly, Devonshire-Ellis notes, “Global trade flows are changing fast and EU and US companies need to be aware of the emergence of powerful new competition from India and Russia for the China consumer market”.
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