Deal could 'serve as example' for Japan to boost growth
China and South Korea on Monday officially signed a free trade agreement (FTA) in a "milestone" deal expected to spur bilateral trade between Asia's largest and fourth-largest economies and further facilitate regional integration.
The FTA, the largest for China so far in terms of trade volume, was signed on Monday by China's Commerce Minister Gao Hucheng and his South Korean counterpart Yoon Sang-jick in Seoul, three years after the two sides started talks in 2012.
The FTA covers 17 areas, including trade in goods and services, as well as investment and trade rules, according to a post on the website of China's Ministry of Commerce (MOFCOM) on Monday.
Under the agreement, South Korea will remove tariffs on 92 percent of products from China within 20 years of implementation, while China will eliminate tariffs on 91 percent of products from South Korea.
The agreement will be officially implemented after approvals from the parliaments of both countries, the Xinhua News Agency reported Monday.
In a congratulatory letter to South Korean President Park Geun-hye, Chinese President Xi Jinping said that the FTA marks a "milestone" event - it will not only boost bilateral trade ties between China and South Korea to get a new leap-forward, but will also contribute to regional integration in East Asia and the Asia-Pacific, according to a MOFCOM post on Monday.
Park also said in a letter that the agreement is a milestone in deepening the two countries' strategic cooperative partnership, and it will bring opportunities and benefits to businesses and people of both countries, according to the same MOFCOM post.
China is now the largest destination for South Korean goods and outbound investment, while South Korea is China's third-largest trade partner and fifth-largest source of foreign investment, according to MOFCOM.
In 2014, trade volume between the two countries totaled $235.4 billion, according to South Korean customs data. Experts noted that the number is expected to top $300 billion in 2015, boosted by the FTA.
Although China-South Korea bilateral trade rose by 2.8 percent in 2014, South Korea's exports to China dropped 0.4 percent last year. The country's exports are still tumbling, with its overall exports plunging 10.9 percent in May and those to China down 3.3 percent from a year earlier, Xinhua reported Monday.
"The FTA will greatly spur bilateral trade [between China and South Korea], as their economies are highly complementary," Bank of Communications analyst Liu Xuezhi told the Global Times Monday.
Liu noted that consumers from the two countries can expect to see tangible benefits - cheaper Chinese farm produce will be available to South Korean consumers and Chinese buyers could shop for cheaper South Korean electronics and skin-care products without the trouble of going to South Korea.
South Korean-made electronics such as Samsung and LG smartphones, TV sets and computer monitors are very popular in China, though domestic Chinese competitors have been posing serious competition in these areas. South Korean cosmetics are also popular with Chinese consumers, with increasing numbers of Chinese tourists buying cosmetics during shopping sprees in South Korea.
The tariffs on some "highly sensitive" products are not fully removed, China Central Television reported on Monday. These products include some Chinese agricultural and textile products and some manufacturing products from South Korea, like steel and auto products, the report said.
After the implementation of the FTA, the two countries will continue the negotiations in bilateral services trade and investment, MOFCOM said.
The two commerce ministers also exchanged views on the trilateral China-South Korea-Japan FTA as well as the Regional Comprehensive Economic Partnership (RCEP) at the signing ceremony of the China-South Korea FTA, Xinhua reported Monday.
The RCEP is a multilateral FTA that will include China, South Korea, Japan, 10 members of the Association of Southeast Asian Nations, India, Australia and New Zealand.
"Signing the China-South Korea FTA is a good example. It will help facilitate other regional economic cooperation mechanisms, such as the RCEP and the agreement among China, South Korea and Japan," Huang Wei, an expert at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, told the Global Times on Monday. "Japan needs stimulus like an FTA to boost growth, especially at a time when its economy is facing hard times," she noted.
The FTA deal is also expected to benefit North Korea, as 310 products made at the Kaesong industrial zone jointly operated by the two Koreas will enjoy free tariffs, Reuters quoted South Korea's Trade Ministry as saying. Woo Tae-hee, South Korea's assistant minister for trade and chief free-trade negotiator, said it was hoped the agreement with China would lead to more industrial zones like Kaesong along the border with North Korea.
