RCEP currency settlement

The Regional Comprehensive Economic Partnership (RCEP), signed in November 2020 and entered into force on 1 January 2022, is a free trade agreement among 15 Asia-Pacific economies: the ten ASEAN members plus China, Japan, South Korea, Australia, and New Zealand. The agreement itself focuses on tariff reduction, rules of origin, services, investment, and e-commerce. It does not establish a common currency, a payment system, or a binding currency-settlement mechanism.

"RCEP currency settlement" is an informal shorthand used in policy commentary to describe the broader trend, often discussed alongside RCEP, of member states settling more bilateral trade in local currencies rather than the US dollar. Several parallel arrangements support this:

• Bilateral currency swap lines maintained by the People's Bank of China with most RCEP partners.
• Local Currency Settlement (LCS) frameworks developed among ASEAN+3 central banks, including bilateral LCS agreements between Bank Indonesia and the central banks of Malaysia, Thailand, Japan, and China.
• The Chiang Mai Initiative Multilateralisation (CMIM), an ASEAN+3 currency-swap arrangement separate from RCEP but covering an overlapping membership.
• Growing use of CIPS (China's Cross-Border Interbank Payment System) for renminbi-denominated trade.

Delegates should be careful: RCEP's legal text contains no currency clauses comparable to the euro area or to a payments union. Claims that RCEP "creates a yuan bloc" or "displaces the dollar" overstate the treaty. What RCEP does is deepen intra-regional trade flows, which in turn raises demand for local-currency invoicing and incentivises central banks to expand existing settlement arrangements.

For MUN and research purposes, the accurate framing is: RCEP is a trade agreement whose growth in intra-bloc commerce is accelerating pre-existing local-currency settlement initiatives among its members, particularly those led by China, Japan, and ASEAN central banks.