The impact and knowledge of free trade agreements on China’s traditional industries’ restructuring

Under China’s dual circulation strategy, traditional industries that are highly dependent on international supply chains face significant challenges requiring restructuring. This study develops a multi-scale analytical model that integrates the Global Trade Analysis Project (GTAP) with the enormous regional model (TERM), enhanced by sectoral decomposition techniques, to enable a detailed assessment of how free trade agreements (FTAs) influence spatial and industrial reconfigurations. Using China’s paper industry as a case study, we systematically examine how the Regional Comprehensive Economic Partnership (RCEP) reshapes domestic and global value chain dynamics. The analysis reveals three key structural changes: (1) upstream sectors exhibit material substitution, with increased imports of wood and non-wood pulp while domestic waste pulp production grows, signaling a strategic reallocation of resources; (2) midstream sectors, particularly in corrugated board and paperboard production, demonstrate geographic shifts, and coastal clusters are relocating capacity to RCEP partner countries, while inland areas see capacity growth driven by regional policy incentives; and (3) downstream industries benefit from upstream agglomeration effects, leading to a 5 % to 30 % increase in paper product output in Guangdong, Jiangsu, Zhejiang, and Anhui provinces. Quantitatively, the RCEP generates synergistic gains through international specialization and domestic clustering, contributing to a 0.33 % annualized compound growth rate in sectoral output. These findings empirically support the effectiveness of industrial transition strategies, suggesting three policy recommendations: (1) establishing strategic reserves for critical raw materials; (2) developing differentiated regional industrial roadmaps; and (3) leveraging agglomeration economies to optimize domestic production networks. Methodologically, this study advances computable general equilibrium (CGE) models in assessing the impacts of FTAs on industrial restructuring, offering actionable insights for globally dependent industries undergoing strategic transitions.