China, South Korea agreement set to boost GDP
The free trade agreement (FTA) between China and South Korea will become a new engine for China's GDP growth and will also push forward the establishment of a free trade area between China, South Korea and Japan, a spokesman for the Ministry of Commerce (MOFCOM) said Tuesday.
China and South Korea officially signed the FTA Monday, and it is expected to be implemented in early 2016.
The agreement will help China's GDP grow by about 0.34 percentage points, and allow South Korea's GDP to grow by about 0.97 percentage points, Shen Danyang, a spokesman for MOFCOM, told a press conference Tuesday in Beijing.
Under the China-South Korea FTA, Chinese people will not have to travel to South Korea to buy cosmetics, home appliances and clothes because they will be able to purchase them at cheaper prices in China, Shen said.
Meanwhile, South Korea will increase its imports of certain kinds of agricultural products from China, such as celery and poultry, in the next few years.
The trade volume between China and South Korea rose to nearly $300 billion in 2014 from just $90 billion in 2004 when the two countries began looking into the feasibility of an FTA, according to data from MOFCOM.
As well as removing tariffs on goods, China and South Korea will both lower barriers for companies that invest in both countries, Shen said.
For example, South Korean companies that specialize in environmental protection will be able to establish wholly owned corporations in China, he noted.
Express delivery services will also get a boost, as the FTA will lower barriers to cross-border logistics, according to MOFCOM.
This will help Chinese companies expand their services overseas, said Xu Yong, chief advisor at China Express and Logistics Consulting.
"Compared to leading global logistics companies like DHL and UPS, Chinese companies have much less international business and they need to explore overseas markets in the next few years," Xu told the Global Times Tuesday.
Shen from MOFCOM also noted that implementing the FTA between China and South Korea will boost progress on the Free Trade Area of the Asia-Pacific (FTAAP), an economic integration agreement for the Asia-Pacific region.
Formal discussions about the FTAAP began at an Asia-Pacific Economic Cooperation (APEC) meeting in Hanoi, Vietnam in 2006. Further progress in negotiations on the FTAAP was made at the APEC summit in Beijing in November 2014.
The FTAAP is set to be one of the largest FTAs in the world, covering about half of the global economy and trade.
"China and South Korea are moving forward in terms of bilateral trade ties, which increases the possibility of restarting free trade talks between China, South Korea and Japan," Cui Zhiying, a professor specializing in South Korea at Tongji University in Shanghai, told the Global Times Tuesday.
"While the Trans-Pacific Partnership (TPP) negotiations between Japan and the U.S. are not going smoothly, Japan is likely to reconsider its position in the Asia-Pacific region after South Korea and China signed their FTA," said Cui.
Considering that China and South Korea account for 25 percent of the total economic output of all APEC members and 29 percent of the total trade volume of APEC economies, the FTA between South Korea and China will play a significant role and serve as an example for other free trade zones in the Asia-Pacific region, according to Shen from MOFCOM.
Promoting a free trade zone in Northeast Asia has always been more challenging than in Southeast Asia, as Japan is seen as a source of opposition, said Cui.
However, Japan has to prioritize its partnership with Asian economies rather than the U.S., as Asia is expected to maintain its strong economic growth, particularly under the "One Belt, One Road" initiative, he noted.
