China’s Free Trade Agreements Framework

China has established its strategic position in the world, in part due to its signing of numerous and advantageous free trade agreements. The duty and tax reductions provided by FTAs, has helped enable China’s rise as the leading world manufacturing hub in recent decades.

A Free Trade Agreement (FTAs) is a type of agreement utilized by two or more countries in order to agree on the terms of trade between them. Such agreements determine the value of tariffs and duties that countries impose on imports and exports.

List Free Trade Agreements

In total, China has signed off 22 FTAs, which involve a total of 29 countries and regional blocs (including ASEAN, comprising 10 nations). A further 10 FTAs are currently under negotiation, while 8 more are under consideration.

China’s major Free Trade Agreements

RCEP

The Regional Comprehensive Economic Partnership, signed by 15 Asia-Pacific countries – China, Japan, South Korea, New Zealand, Australia, and the 10 Association of Southeast Asian Nations (ASEAN) member states – is the world’s largest free trade agreement.

The RCEP Advantage Part 4 – The Future of Trade in China

The primary aim of the RCEP is to establish a comprehensive economic partnership based on existing bilateral ASEAN agreements with its FTA partners in the region. It is guided by a uniform set of rules and standards, lowered trade barriers, streamlined processes, and improved market access. RCEP will provide substantial new trade and investment opportunities within the participating countries, covering roughly 30 percent of the global GDP (US$26.2 trillion) and 30 percent of the world’s population to form Asia’s largest trade bloc to date.

China-ASEAN FTA

The China-ASEAN FTA eliminates import-export tariffs and other barriers on some 90 percent of all products traded between China and the ASEAN member states. The signing of the China-ASEAN FTA, followed by the RCEP agreement, would have a significant impact on China and Asia's’ development in global sourcing and the foreign investment.

CEPA between mainland and Hong Kong/Macao

To address differences concerning tariffs and duties, China structured the Closer Economic and Partnership Arrangement (CEPA) with Hong Kong and Macao. These CEPA agreements provide a number of incentives for businesses from each Special Administrative Region to invest in mainland China, irrespective of beneficial ownership. These include permitting fast-track investment into industry sectors in China still restricted to foreign investors, as well as large service industry concessions. A qualifying period and minimal tax contribute requirements are essential in either Hong Kong or Macao. CEPA regulations allow foreign businesses to acquire a Hong Kong business and utilize it to participate in markets that are subject to restrictions on total foreign ownership in mainland China in some industries (primarily the services sector).

China-Singapore FTA

Under the China-Singapore FTA, the two countries accelerated the liberalization of trade in goods based on the Agreement on Trade in Goods of the China-ASEAN FTA. However, the Singapore agreement goes beyond the China-ASEAN FTA in liberalizing trade in services between the two countries. Singapore investors should examine both the China-ASEAN FTA and the China-Singapore FTA to fully comprehend the numerous benefits available to them under these respective agreements with China.

China-Republic of Korea (ROK) FTA

The China-ROK FTA aims to further expand bilateral trade and two-way investment, improve trade facilitation levels, and increase the predictability and transparency of two-way investment. It also strives to promote free flow of goods, capital, and personnel between China and ROK, and create an easier, opener, and fairer trade and investment environment.

Bilateral Investment agreements (BITs)

China currently has a total of 107 BITs in force - including Austria, the Belgium-Luxembourg Economic Union, Canada, France, Germany, Italy, Japan, South Korea, Spain, Thailand, and the United Kingdom. Another 17 BITs are under negotiation. BITs are signed between two countries or regions that set out terms and regulations for private investors in the partner country.

China’s bilateral trade agreements seek to promote and facilitate bilateral foreign investment by protecting foreign investors from unfair treatment in the host country. This helps ensure they can enjoy the same rights as domestic investors for the scope of investments detailed in the agreement.

Among others, BITs are a useful starting point to clarify legal and tax treatments under bilaterally agreed conditions and should be understood as a bilateral document of first resort when understanding the investment environment, and protection mechanisms that China offers its many trading partners.

Double Tax Avoidance agreements (DTAs)

Double Tax Avoidance Agreements treaties effectively eliminate double taxation by identifying exemptions or reducing the amount of taxes payable in China. Global investors often find themselves in an unfavorable position of having to face being double taxed – taxed by two different countries on the same income – unless there is a double tax avoidance agreement in place. For example, a company might be subject to taxes in its country of residence and also in the countries where it raises income through foreign investments for the provision of goods and services. It is therefore extremely worthwhile for foreign investors to be aware of which double taxation avoidance agreements (DTAs) between China and other countries might be applicable to their situation, as well as understand how these agreements are applied. As of 2024, China has signed DTAs with 114 countries or regions.