New opportunities

China-ROK economic cooperation provides a solid foundation for the further development of their relations

Economic and trade cooperation between China and the Republic of Korea has become a model of mutual benefit and win-win cooperation. Since the establishment of diplomatic relations between China and the Republic of Korea in 1992, bilateral economic cooperation has seen notable growth. China-ROK trade has soared from about $5 billion in 1992 to about $360 billion in 2021. Bilateral trade between China and ROK rose by 26.9 percent year-on-year in 2021, showing economic resilience and strong growth momentum.

The actual investment of the ROK in China increased from $140 million in 1992 to $4.04 billion in 2021. By 2021, the ROK's actual investment in China totaled $86.19 billion, and China's actual investment in the ROK reached $9.85 billion. The ROK is the second largest investor in China. Trade between China and the ROK accounts for nearly one-fourth of the ROK's total foreign trade, and it is close to the total trade volume between the ROK and the United States, Japan and European countries.

The strategic competition between China and the US provoked by the latter has escalated since 2017, which has dragged on economic globalization. In addition, the COVID-19 pandemic and climate change have accelerated the restructuring of the world's industry supply chains. As a result, China-ROK economic cooperation faces both challenges and opportunities.

The US is trying to dominate the world's high-tech industry supply chain. As the US has military superiority and seeks an upper hand with regard to cutting-edge technologies, the ROK may strengthen its cooperation with the US in pursuit of technological progress. Moreover, the industrial competition between China and the ROK is mounting. The ROK is diversifying its trade and investment to reduce its reliance on China.

Meanwhile, uncertainties remain in the situation on the Korean Peninsula.

But there are also opportunities for cooperation.

First, China's economic growth, market expansion and the improving business environment in China offer great opportunities for China-ROK economic cooperation. China has a large economic aggregate and has established whole-chain industries, both labor-intensive and technology-intensive, and it has implemented its reform and opening-up policy for over four decades, and has developed a high-quality open economy. In April 2022, the Communist Party of China Central Committee and the State Council jointly released a guideline on accelerating the establishment of a unified domestic market to foster a stable, fair, transparent and predictable business environment. The 2022 Government Work Report also stressed expanding imports of high-quality products and services, and encouraging foreign investment in medium-to-high-end manufacturing, research and development, and modern services. China has furthered its economic cooperation with countries participating in the Belt and Road Initiative, built a new land-sea corridor in its western region, promoted the China-Europe freight trains and expanded the Belt and Road to Northeast Asia to improve the connectivity between countries and drive bilateral and multilateral economic cooperation.

Second, China and the ROK still have complementary industrial structures. The ROK enjoys competitiveness in industries such as semiconductors, electronics, automobiles, medium-to-high-end petrochemicals and steel, and has a full-fledged service trade. The ROK high-tech companies have invested heavily in China. There is much room for improving the regional supply chain between China and the ROK based on the highly integrated industry supply chains that are taking shape. Since the upcoming technological revolution will drive the integration of scientific and technological innovation, China-ROK cooperation on big data, artificial intelligence, and the internet of things will be furthered. The cooperation between the two countries will promote multilateral economic cooperation in Northeast Asia, and improve peace and stability of the Korean Peninsula.

Third, the China-ROK free trade agreement and the Regional Comprehensive Economic Partnership have taken effect. In December 2015, the China-ROK FTA came into effect. The two countries have promoted the second-phase of their FTA negotiations on the high-level service trade and investment liberalization through a negative list. As the RCEP agreement has taken effect, a large regional unified market is taking shape, enhancing market competition, boosting investment as well as technological and institutional innovation, and promoting industrial upgrading and restructuring.

Over the past three decades since the establishment of diplomatic relations between China and the ROK, the ROK has seen growth in key industries by providing China with its high value-added products with comparative advantages. ROK enterprises have become part of China's economic growth. For ROK firms including Samsung, Hyundai Motor and SK, the Chinese market plays a key role in their development strategies. China and the ROK have developed close integration of industrial supply chains. The two countries should seize the new opportunities to further strengthen their win-win cooperation.

China and the ROK should strengthen inter-governmental communication and negotiations, seek common ground while shelving differences, maintain and strengthen cooperation. The two countries need to promote local and people-to-people exchanges and third-party market cooperation to consolidate the foundation for their bilateral economic cooperation.

The author is professor of the Center for DPRK-ROK Studies of Yanbian University. The author contributed this article to China Watch, a think tank powered by China Daily.

The views do not necessarily reflect those of China Daily. Contact the editor at editor@chinawatch.cn.