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
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.