Three Asian part­ners re­shape their ties

South Korea is quickly over­tak­ing Ja­pan as China’s re­gional trad­ing part­ner of choice as its au­to­mo­biles and elec­tron­ics are snapped up by the world’s sec­ond-largest econ­omy, re­ports Yao Jing

China Daily (Canada) - - BUSINESS -

Even as China, South Korea and Ja­pan held the fourth round of talks in Seoul ear­lier this month for a tri­lat­eral trade treaty, some changes in the web of re­la­tion­ships link­ing the coun­tries were de­vel­op­ing un­der the radar. One key change was that South Korea sur­passed Ja­pan last year to be­come China’s big­gest source of im­ports.

China’s con­sumer boom and eco­nomic re­struc­tur­ing mean it needs me­chan­i­cal and elec­tronic items, which are South Korea’s ma­jor prod­ucts. And China-Ja­pan trade continues to be af­fected by pro­longed ter­ri­to­rial dis­putes and po­lit­i­cal ten­sions.

Both coun­tries, which of­fer sim­i­lar prod­ucts and tech­nolo­gies, are bat­tling for their share of the world’s largest mar­ket.

At the be­gin­ning of this month, South Korea re­ported that it had posted a trade sur­plus for 25 con­sec­u­tive months as ex­ports con­tin­ued to grow.

Ex­ports to China, South Korea’s largest trad­ing part­ner, in­creased 8.6 per­cent last year to $183.07 bil­lion, ac­cord­ing to the Min­istry of Com­merce.

South Korea sup­plied 9.24 per­cent of China’s im­ports in 2013, up from 9.17 per­cent in 2012. The pro­por­tion for Ja­pan slid from 9.78 per­cent to 8.19 per­cent, ac­cord­ing to South Korean of­fi­cial data.

“Cater­ing to China’s eco­nomic growth, South Korea’s ex­ports of au­to­mo­biles and petro­chem­i­cals, smart­phones, and flat-screen TVs to China have wit­nessed a pickup in re­cent years,” said Song Hong, an econ­o­mist at the In­sti­tute of World Eco­nom­ics and Pol­i­tics at the Chi­nese Academy of So­cial Sci­ences, a govern­ment think tank.

South Korea’s au­to­mo­bile ex­ports reached a new high of $48.7 bil­lion in 2013, with ex­ports to China up 13.2 per­cent, ac­cord­ing to the South Korea’s Min­istry of Trade, In­dus­try and En­ergy. Ex­ports of in­dus­trial com­po­nents to China were up 5.8 per­cent in 2013.

South Korea is be­com­ing a much more open mar­ket, and com­pa­nies based there are show­ing more am­bi­tion to ex­pand abroad.

South Korea has signed FTAs with the United States and Europe, which took ef­fect in 2012 and 2011, re­spec­tively.

China and South Korea are try­ing to in­crease eco­nomic ties. They ad­vanced their free trade ne­go­ti­a­tions at the ninth round of talks in Xi’an, Shaanxi prov­ince, in Jan­uary. “China, as a neighbor and a ma­jor econ­omy, is the first choice of com­pa­nies in South Korea,” said Song.

This is shown by South Korean busi­ness gi­ants’ per­for­mance in the Chi­nese mar­ket.

For ex­am­ple, Sam­sung Elec­tron­ics Co Ltd saw an 80 per­cent in­crease in its sales in China last year, driven by the pop­u­lar­ity of smart­phones and wide-screen tele­vi­sions. It’s es­tab­lished a sec­ond plant in China, its largest over­seas project.

China-South Korea trade now ex­ceeds $250 bil­lion an­nu­ally, ac­cord­ing to the Min­istry of Com­merce. By the end of 2013, South Korea had in­vested in 56,224 projects in China, with paid-in in­vest­ment of just un­der $56 bil­lion.

“We hope to in­crease bi­lat­eral trade to more than $300 bil­lion by 2015,” Com­merce Min­is­ter GaoHucheng said.

Still, Song cau­tioned that with China’s de­vel­op­ment, South Korean businesses in China will face in­creas­ing com­pe­ti­tion from do­mes­tic pro­duc­ers in their in­dus­tries.

“When com­puter gi­ant Len­ovo Group Ltd, telecom­mu­ni­ca­tions gi­ant Huawei Tech­nolo­gies Co and ZTE Corp are grab­bing mar­ket share, pro­duc­ers from South Korea may be forced to climb up the value chain in China,” said Song.

The prospects for trade and eco­nomic ties be­tweenChina and SouthKorea look good.

For Ja­pan, how­ever, it’s a less op­ti­mistic pic­ture, ac­cord­ing to Shen Danyang, a spokesman for the Min­istry of Com­merce.

China-Ja­pan trade con­tracted 5.1 per­cent last year to $312.55 bil­lion, ac­count­ing for 7.5 per­cent of China’s to­tal trade value, ac­cord­ing to Chi­nese cus­toms fig­ures.

China’s ex­ports to Ja­pan dropped 0.9 per­cent to $150.28 bil­lion, while its im­ports fell 8.7 per­cent to $162.28 bil­lion.

In 2013, China’s to­tal out­ward di­rect in­vest­ment in Ja­pan fell 23.5 per­cent, and Ja­pan’s in­vest­ment in China de­creased 4.28 per­cent, ac­cord­ing to the Min­istry of Com­merce.

“Po­lit­i­cal ten­sions aside, the out­look for Ja­panese in­vest­ment in China de­pends on the size of the Chi­nese mar­ket” for par­tic­u­lar in­dus­tries or com­pa­nies, said YaoHaitian, a re­searcher at the In­sti­tute of Ja­panese Stud­ies, which is un­der the Chi­nese Academy of So­cial Sci­ences.

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