ROLLING ALONG: Beijing Hyundai Motor Company, a Chinese and South Korean joint venture, holds an event in Beijing on February 22, to celebrate the production of its 1 millionth vehicle

Strong trade and economic cooperation between China and South Korea benefits both countries and the region at large

South Korean President Lee Myung Bak visited Datang Telecom Technology Co. Ltd. in Beijing on May 28 and held a video conference via the Chinese company's CDMA and TD-SCDMA networks with athletes in Seoul who plan to attend the Beijing Olympics.

Lee made the call because of a collaborative effort between Datang and SK Telecom, which he praised as "a model of new cooperative pattern" between China and South Korea.

Such joint efforts prompted Lee to review the achievements that his country and China have made in trade and economic relations and sign a new agreement to strengthen their bilateral cooperation.

International economics experts from China believe that although disadvantages still exist in their trade ties, there are also opportunities for China and South Korea to improve their levels of trade and investment and further advance the regional integrity of East Asia.

Growing cooperation

Development in the two countries' trade and economic cooperation has been remarkable since they established diplomatic relations 16 years ago.

Since 2003, China has been South Korea's biggest importer, mainly purchasing raw materials and spare parts to meet the demands of its rapid economic development. Since 2004, China has been South Korea's top trade partner in both exports and imports.

In 2005, the two countries issued a joint report that mapped out medium- and long-term blueprints for their bilateral trade and economic cooperation. It covered 12 industrial areas and five measures to ease trade and investment.

According to South Korean data, the bilateral trade volume reached $145 billion in 2007, or 23 times higher than it was in 1992. South Korea's trade surplus with China accounts for more than 80 percent of its total trade surplus with foreign countries. Besides, China is also South Korea's most popular destination for overseas investment.

Governmental officials, economists and academics in both countries have been working together to discuss a possible China-South Korea free trade agreement. Exchanges involved with bilateral trade were at the top of Lee's agenda, demonstrating the former corporate executive's very practical approach to bilateral economic cooperation.

The two sides issued a joint statement on May 28 in Beijing, which confirmed that they would strengthen their mutually beneficial cooperation, especially in the trade and hi-tech areas, including telecommunications, nuclear energy, energy conservation and environmental protection. They also agreed to work closely together to avoid any potential regional financial disasters, such as the Asia financial crisis in the late 1990s.

The statement also said China would welcome South Korean enterprises to participate in developing business in the country's western and northeastern regions. In the meantime, China will support its enterprises that seek business and investment opportunities in South Korea.

Advantages and disadvantages

The two countries have good reason to improve their trade and economic cooperation, observers said.

"Chairman Mao Zedong once said international relations should both look good and taste good," said Mei Xinyu, a researcher at the Chinese Academy of International Trade and Economic Cooperation. "Trade and economic cooperation is the thing that can make the China-South Korea relationship taste good."

The two nations' current trade and economic cooperation displays certain characteristics, Mei said. For example, South Korea exports more items to China than it imports; and there are more South Korean enterprises in China than vice versa. These South Korean enterprises mainly import large amounts of spare parts and semi-finished products, then sell the finished products in China and South Korea, and export them to the United States and Europe.

"The benefit to the South Korean side is very clear," said Liu Qunyi, an associate professor who specializes in South Korea economic studies at Peking University.

Liu referred to a report issued by the Korea Institute for International Economic Policy that said South Korea would benefit not only from its basic bilateral economic relationship with China, but also from its presence on the Chinese market and in a new division of labor in East Asia.

During his visit, Lee stressed that trade and economic cooperation between China and South Korea should emphasize "qualitative change," or stronger cooperation in the hi-tech areas mentioned in the two countries' joint statement, instead of their current focus on "quantitative change."

Although the two sides are concentrating more on hi-tech areas such as telecommunications and energy cooperation, their bilateral trade and economic cooperation has not yet realized a "qualitative change." Instead, it has been characterized by a normal transfer of cooperative aspects, Mei said.