China-S Korea FTA positive for both countries: Moody's

A free trade agreement (FTA) between China and South Korea will be positive for both countries as the deal will strengthen the already-strong economic ties between the two countries, a global credit rating company Moody's said Thursday.

"Last Thursday, the leaders of China and Korea pledged to conclude the FTA by the end of this year. A deal would be credit positive for both countries because it would deepen investment flows and provide a boost to GDP,"Tom Byrne, senior vice president at Moody's, said in a report.

Chinese President Xi Jinping and his South Korean counterpart Park Geun-hye vowed during a summit meeting in Seoul last week to endeavor to finish the FTA talks before the end of 2014, pledging to expand bilateral trade volume to 300 billion U.S. dollars in 2015.

Trade between the two countries surpassed 270 billion dollars in 2013, equaling to South Korea's trade volume with the United States and Japan combined.

China and South Korea launched the FTA negotiations in May 2012, and had completed the first stage of talks in September last year with a total of seven rounds of negotiations.

The 12th round of negotiations will be held for five days from July 14 in South Korea's southeastern city of Daegu.

Moody's said that the free trade pact would especially benefit South Korea from an economic and a geopolitical perspective, noting the deal would provide Seoul with FTAs with its three largest export destinations, including the United States, the European Union (EU) and China.

South Korea already signed the free trade deal with the U.S. and the EU, and those pacts have come into force.

China is South Korea's No.1 trading partner, largest export destination and import source and No.1 destination of overseas investment. South Korea is China's third-largest trading partner and fifth-largest source of foreign direct investment.

Moody's said concluding the pact will not be smooth sailing as negotiators will have to resolve contentious issues such as China' s access to South Korea's agricultural market and South Korea's access to China's auto market.

Strong economic and political ties between the two nations could benefit South Korea geopolitically if a stronger relationship with Beijing helped contain Pyongyang's hostile policies toward Seoul, the rating agency added.