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RCEP’s geography clearly attracts firms, but exchange rates, subsidies, security concerns and supply-chain resilience are doing at least as much as its rules (SeongJoon Cho/Bloomberg via Getty Images)
Asian trade has stabilised, but most of the region’s own capital is still flowing elsewhere.
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RCEP’s next test is whether it can keep investment in AsiaRCEP’s next test is whether it can keep investment in Asia
As global trade fractures along geopolitical lines and tariff uncertainty continues to rattle supply chains across the Asia–Pacific, the region’s biggest trade agreement faces a test more important than another round of tariff headlines: can it influence where companies actually put their capital?
The Regional Comprehensive Economic Partnership (RCEP) brings together the Association of Southeast Asian Nations (ASEAN) members, China, Japan, South Korea, Australia and New Zealand, covering about 30% of global GDP and population (Opens in new window). Its political achievement was breadth: it placed economies at very different stages of development under one framework and consolidated the region’s overlapping “ASEAN+1” agreements.
Four years on, however, RCEP is supporting investment without transforming it.
Research at the Asia Competitiveness Institute (Opens in new window) in Singapore shows that announcements of new ventures – known as greenfield investments – into RCEP economies rose from about US$125 billion in 2022 to US$178 billion in 2024. That resilience matters in a difficult global climate. But much of the increase reflects forces already reshaping production: China-plus-one strategies, semiconductor diversification, industrial policy and geopolitical hedging.
A stabilising agreement reassures firms. A transformative one changes where they invest. RCEP remains closer to the former.
A stabilising agreement reassures firms. A transformative one changes where they invest.
ASEAN is the clearest success. Vietnam, Malaysia, Indonesia and Thailand have become prominent hosts for new manufacturing projects. Since RCEP entered into force, investment from Northeast Asia into ASEAN has expanded sharply, accounting for roughly 80% of intra-RCEP greenfield investment in 2023 and 2024. China alone supplied more than half in both years.
An emerging division of labour is visible: China, Japan and South Korea provide capital, technology and industrial networks, while ASEAN increasingly hosts production and assembly. Yet the gains remain narrow. Manufacturing represented almost 90% of intra-RCEP greenfield investment in 2024, and a handful of economies captured most projects. RCEP has strengthened several investment corridors, not built a genuinely integrated investment network.
Changes in 2024 also show the limits of the agreement’s influence. Japan recorded its highest greenfield inflows between 2019 and 2024, helped by a weaker yen, government incentives and demand for secure semiconductor and green-energy capacity. Taiwan became the largest source of new greenfield investment into RCEP economies as its semiconductor firms expanded in Vietnam, Malaysia and Singapore.
RCEP’s geography clearly attracts firms. But exchange rates, subsidies, security concerns and supply-chain resilience are doing at least as much as its rules.
The larger warning is where Asian capital goes. From 2022 to 2024, only about one-fifth of outward greenfield investment from RCEP members remained within the bloc. The United States was the leading destination, while Brazil, Mexico and Morocco attracted firms seeking access to American and European markets.
This global diversification is commercially rational. But a mega-agreement should do more than consolidate existing supply chains. It should make the region a compelling location for the next factory, data centre, logistics network or clean-energy facility. RCEP is not yet anchoring enough of its members’ own capital in Asia.
Part of the problem is legal design. RCEP preserves host governments’ regulatory autonomy, defines covered investments through domestic law and omits the more ambitious labour, environmental, state-owned enterprise and digital disciplines found in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It also lacks investor-state dispute settlement, relying instead on state-to-state procedures and a work program to revisit investment disputes.
That caution made agreement among 15 diverse economies possible. But it has produced stability without sufficient practical facilitation or institutional machinery.
As multinationals face tighter climate reporting and supply-chain due-diligence requirements, investment rules that neglect environmental and labour standards will become less useful and less competitive (EqualStock/Unsplash)
The 2027 review should pursue a realistic upgrade, not attempt to remake RCEP as the CPTPP.
First, members should centralise investment regulations, establish usable national contact points and improve coordination among agencies. For many firms, especially smaller ones, opaque rules and fragmented approvals matter more than formal restrictions.
Second, RCEP needs an explicit investment-facilitation pillar to streamline approvals, reduce duplication and provide technical assistance to members with weaker administrative capacity.
Third, members willing to adopt stronger protections could opt into a common dispute-settlement mechanism, allowing ambition to increase without threatening consensus.
Finally, an upgrade should address sustainability and corporate responsibility. As multinationals face tighter climate reporting and supply-chain due-diligence requirements, investment rules that neglect environmental and labour standards will become less useful and less competitive.
RCEP has provided stability at a time of economic fragmentation. That is worthwhile, but insufficient for an agreement of its scale. Its 2027 review is an opportunity to turn geographic weight into strategic relevance (Opens in new window) by making investment rules easier to use, more credible across jurisdictions and better aligned with how firms now manage geopolitical risk.
If members miss that opportunity, RCEP may fulfil its critics’ prediction: a very large agreement making only a small difference to the investment decisions that will shape Asia’s economic future.
About the authors
Tran Thi Ngoc My
Tran Thi Ngoc My is a Research Analyst at the Asia Competitiveness Institute, Lee Kuan Yew School of Public Policy, National University of Singapore.
Banh Thi Hang
Banh Thi Hang is a Senior Research Fellow at the Asia Competitiveness Institute, Lee Kuan Yew School of Public Policy, National University of Singapore.
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