This article first appeared in The Edge Financial Daily, on November 23, 2015.

KUALA LUMPUR: The Trans-Pacific Partnership (TPP) should be kept free from politics in order to properly serve its purpose, China National Association of International Studies (CNAIS) director Victor Gao said, adding that mixing free trade with politics and ideology would not be sustainable.

Gao, a former interpreter for late Chinese leader Deng Xiaoping, who is also an executive director of Beijing Private Equity Association, said the trade pact could backfire in the longer term.

“Philosophically speaking, if TPP is truly promoting free trade, then China will have no problem accepting it or working within the framework of TPP.

“But as US President Barack Obama has pointed out, TPP may not only be promoting free trade for free-trade purposes, it may have some extraneous political or ideological considerations. [As such,] I would say that mixing free trade with politics and ideology in the medium to long term may not be sustainable,” he said.

The CNAIS director was speaking to reporters on Saturday after his session on “Is China’s Economy Slowing Down?” at the Asean Business and Investment Summit 2015, which was moderated by The Edge Media Group publisher and group CEO Ho Kay Tat.

China isn’t a part of the TPP, which involves 12 countries namely the United States, Australia, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and Brunei. The deal is seen as a challenge to China’s growing dominance in the Asia-Pacific region.

Gao pointed out that the TPP still needs to get the approval of the legislators in the 12 member states, adding that the world will have to wait and see whether the pact can really provide benefits to the member states.

“Globalisation is inevitable. [So,] if you create a very exclusive club of nations to do free trade by excluding other states in the Asia-Pacific region, eventually it will not work.

“And anyone who believes that it can isolate China, which accounts for 20% of the global population and the global economy based on purchasing power parity, I think that attempt is equivalent to indulging in fantasy,” he said.

Gao noted that if the TPP is truly designed to promote free trade, it will benefit by welcoming China to join.

On concerns about China’s economic slowdown, Gao conceded that the country’s growth rate has slowed down significantly in absolute terms, from the high of 11% to 12% five years ago to the current 7% growth rate.

However, he said, the size of the Chinese economy has seen immense growth, noting that it has grown larger than Japan’s in terms of official exchange rate.

“As of last year, the Chinese economy, in terms of purchasing power parity, became larger than that of the US. And the Chinese economy is still growing. Each new percentage growth on the enlarged base of the economy would probably equal to 2% or 3% gross domestic product growth several years ago.

“So, while China’s growth rate is slowing down, new addition to the Chinese economy on an annual basis is becoming larger,” he said.

He added that different regions in China are growing at different rates, noting that while developed cities like Beijing and Shanghai are registering growth of below 7%, cities like Chongqing, those in the western part of China and autonomous regions like Xinjiang, are still seeing growth of more than 10%.

“So, China is not monolithic in terms of growth rates and foreign investors need to be more objective when they look at the reality of China,” he said.

On the yuan, Gao expects the currency to appreciate against the greenback in the longer term if China continues to grow at a rate of around 7% per year, against a growth of around 3% by the US.

He added that the International Monetary Fund may make a decision soon on whether to accept the yuan as one of the special drawing rights currencies, which will drive demand for the currency in the next few years as major central banks will have to accept it as part of their currency reserves.

“All factors combined together, you will see greater prospect of gaining in value of the yuan against the US dollar and other major currencies,” he said.