As the global recovery falters, China and the Republic of Korea (ROK) will seek new opportunities together, with the close economic relationship that a free trade agreement (FTA) brings.
Accompanied by a huge trade delegation, Chinese President Xi Jinping began his first visit to ROK as Chinese leader on Thursday.
The first tangible result of the visit was a memorandum of understanding between the two central banks on renminbi (RMB) clearing in Seoul, bringing direct trading of the yuan against the won, the ROK currency, a step closer. Seoul's bid to become an offshore center for the RMB enjoys increasing international popularity, backed by China's rapidly stabilizing economy.
For Zhang Jianping of the foreign economic research institute at the National Development and Reform Commission, less reliance on a third-party currency, fewer transaction fees and reduced investment costs can only be good for both sides.
The memorandum includes an 80 billion yuan (13 billion U.S. dollars) investment quota granted to ROK under the RMB Qualified Foreign Institutional Investors (RQFII) program. Launched in 2011, RQFII allows foreign investors to invest on Chinese stock and bond markets with offshore RMB.
Other documents covering trade, finance and consular issues were signed during Xi's visit.
Beyond the work of the two governments, an exceptionally impressive business delegation from China Friday afternoon met with their ROK peers.Over 250 Chinese entrepreneurs from manufacturing, finance and IT accompanied the President. Among them were Ren Zhengfei, president of Huawei, and Li Yanhong, board chairman of search engine Baidu.
Trade between China and ROK amounted to 710 billion yuan in the first five months, with investment from the latter up 88 percent. Two-way trade passed 270 billion U.S. dollars in 2013, making ROK China's sixth largest trade partner and third largest source of imports.
FTA APPROACHING CONCLUSION
After over 20 years of cooperation, the FTA will be a profound and significant part of future relations. Xi and his ROK counterpart Park Geun-hye have agreed to try to conclude FTA negotiations by the end of this year. Negotiations began in May 2012 and the 12th round of talks is scheduled for later this month in ROK.
Mei Xinyu of the Ministry of Commerce believes that the most important aspect of Xi's visit will be promoting the negotiation. Echoing his words, Zhang Jianping points out that only direct discussion between the leaders can deal with the sensitive and thorny matters that are holding things up.
The FTA negotiation is just one of the three major negotiations this year which will, to some extent, determine whether bilateral trade will reach the promised 300 billion U.S. dollars next year.
An FTA breakthrough would boost trade, investment and even GDP growth. It would help ROK reinforce its position in the Chinese market, as weakening technological leverage allows in U.S.and European rivals, said Mei. As for China, engaged in FTA talks around the world, a successful negotiation with its neighbor will set a good example.
FTA between China and Switzerland took effect on Tuesday, China's first FTA with an European country and one of the world's top 20 economies.