Trade between China and South Korea is expected to reach US$200 billion in five years if it keeps growing at 15 percent a year, a leading expert said yesterday, a day before Premier Wen Jiabao begins his two-day visit to South Korea.

 

The target is highly achievable, given the strengthening of trade and economic relations between the two countries, and the 26.2 percent annual growth between 2001 and 2006, said Xu Changwen, a researcher with the Chinese Academy of International Trade and Economic Cooperation, under the commerce ministry.

 

Xu attributes the fast growth to the complementary characters of the two economies.

 

The economic minister in South Korean embassy in Beijing Shin Bong-kil corroborated Xu, and said imports and exports in high and new technology would increase remarkably and industrial exchanges would intensify.

 

Last year, the trade volume between the two countries was US$134.3 billion, according to China customs' statistics, with the country having a trade deficit of US$45.3 billion.

 

Shin expects the trade gap to narrow down as South Korean enterprises in China increase sourcing locally. South Korea is the fourth largest foreign investor in China. The first three are the United States, Japan and Singapore. Also, China is the top destination for South Korean investors.

 

Xu said China, particularly its eastern and southern parts, is attracting South Korean businesses because of its economic growth, domestic demand as well as the good profit margin it offers.

 

"So far, South Korean investors have focused on small and medium-sized projects, some of who don't even understand the Chinese market fully," Xu said.

 

South Korean enterprises will seek a strategic change in China, Shin said, because of the changes in the Chinese government's policies on foreign investment.

 

South Korean investors are expected to shift from labor-intensive, low-cost small manufactures to large enterprises using higher technologies, he said. They could change their investment destinations, too, by moving to the central, western and northeastern parts of China.

 

"Progress is also expected in the logistics, design and financing sectors," Shin said.

 

Both the countries are keen on free trade agreements (FTAs) but want to jointly study the possibility of setting up a Sino-South Korean free-trade zone before deciding when to launch their FTA negotiations.

 

China has FTAs with more than two dozen economies, while South Korea just inked its first with the United States. It is trying to hold talks with India, Canada and Japan in the hope of signing FTAs.

 

Experts from China and South Korea have agreed that an FTA would promote bilateral trade and investment further, boost their economies and create more jobs.

 

(China Daily April 10, 2007)