By Christopher Findlay and Wenxiao Wang
As the chair of Asia-Pacific Economic Cooperation (APEC) in 2026, China has a chance to revitalize Asia-Pacific integration around services and the digital economy. With services accounting for most output and employment across the Asia Pacific, China could deliver substantial gains to APEC economies if it effectively leverages alignment between national and APEC agendas to lead by example in services trade.
Services trade has grown faster than trade in goods. Digitally deliverable services — such as software, business process outsourcing, online finance, and creative content — have contributed strongly to intra‑regional trade and narrowed gaps between advanced and emerging economies.
While there has been significant progress in opening markets for goods, there are regional differences in how services are regulated, how data can move, and how much domestic institutions support competition, innovation, and productivity. These areas call for cooperation — not negotiation — involving shared principles, benchmarking and mutual learning.
APEC’s institutional design is distinctive in this respect. It is a grouping of 21 economies that works through voluntary commitments, non‑binding guidelines, and technical cooperation rather than negotiated market‑access packages. This softer architecture evolved in a region with large differences in income levels and political systems, where governments were unwilling to pool sovereignty but recognized the gains from lowering transaction costs.
Over time, APEC’s work on standards, trade facilitation and regulatory practices has been reflected in binding rules at the World Trade Organization and in free trade agreements, even though APEC itself does not legislate.
As APEC’s services regulations remain heterogeneous and relatively restrictive, APEC economies have developed a toolbox that includes a services trade restrictiveness index, a Services Competitiveness Roadmap, and a structural reform work program covering services-related measures. These instruments allow economies to diagnose their own barriers, compare themselves with peers, and plan sequences of reform without engaging in reciprocal bargaining. The effectiveness of these tools is enhanced by strong leadership, including leadership by example.
Digitalisation both amplifies the opportunity and complicates the policy task. APEC economies have seen rapid growth in digitally ordered and digitally delivered trade. The spread of digital platforms, cloud computing and mobile connectivity has transformed how firms and consumers engage across borders. Dedicated initiatives like the APEC Internet and Digital Economy Roadmap and the APEC Framework for Securing the Digital Economy seek to provide non‑binding guidance on data flows, security, privacy, and consumer protection.
Yet domestic frictions remain — inconsistent rules on data localization, as well as differing privacy standards, approaches to competition la,w and capacities to secure networks and manage AI‑related risks.
China enters its year as chair with services and digital upgrading central to its own growth strategy. Beijing has signalled an intention to move towards more ‘high‑quality’ opening, yet at the same time, comparative indicators still place China among the more restrictive APEC members in several key services and digital policy areas. This dual position — as both a reforming and a still‑restrictive economy — creates a strong alignment between its national interests and the agenda that APEC has been developing, offering significant opportunity for leadership on the services agenda.
First, Ministers have already agreed to adopt a new Services Competitiveness Roadmap beyond 2025. There is scope to anchor that even more explicitly in the next phase of the structural reform agenda. Economies, with China taking a visible lead, could commit to publishing updated diagnostics of services restrictiveness, identifying specific priorities in infrastructure, professional services, logistics, and digital services.
These proposals can then be documented in the Individual Action Plans of the structural reform agenda, and backed by targeted capacity‑building, bolstering services competitiveness by tying high‑level objectives to concrete, monitored reforms.
The agenda could also consolidate APEC’s digital and AI initiatives under a clearer set of reference principles. Members could agree on non‑binding norms on trusted cross‑border data flows, interoperability of privacy and consumer protection regimes, and approaches to AI risk management that reflect the region’s diversity. This would provide a coherent framework that economies can draw on in their own legislation and in the design of digital chapters in future trade agreements, lowering the cost of policy design and reducing the risk of regulatory fragmentation.
A third element would revisit the long‑standing idea of a Free Trade Area of the Asia Pacific (FTAAP). Rather than a prospective mega‑agreement, APEC could position the FTAAP as a transparency and convergence mechanism that maps and compares disciplines across existing arrangements, such as the Regional Comprehensive Economic Partnership and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
A workstream focused on services and digital provisions could highlight where rules diverge, identify emerging good practices, and provide smaller economies with collective analytical capacity in a landscape otherwise dominated by large‑economy bargaining.
None of this would remove the geopolitical tensions that shape regional relations, nor would it resolve fundamental disagreements over security and technology. But a year that delivers measurable progress on services and digital reform, grounded in the instruments APEC already has, would demonstrate the continued usefulness of cooperative frameworks in promoting growth.
For China, success would be less about headline declarations and more about whether its own — and its neighbors’ — domestic reforms can be credibly tracked against the roadmaps and principles that APEC refines during its year as chair.
Christopher Findlay is Honorary Professor in the Crawford School of Public Policy, The Australian National University and Wenxiao Wang is a Lecturer in Economics at Adelaide University. This article was originally published on East Asia Forum and republished here under the Creative Commons BY NC ND license.
