(Bloomberg)
Updated: 2007-04-11 09:39

China and South Korea moved a step closer to establishing a free-trade area during talks that concluded with the signing of four agreements between the Asian nations, including one that will set up a military hotline.

Chinese Premier Wen Jiabao discussed the possibility of closer commercial ties with President Roh Moo-Hyun during a visit to Seoul to try to get South Korea's leader to back a free-trade area.

The idea, the subject of joint research by officials from the two nations, may cut tariffs, pare taxes for their companies and boost trade beyond the US$134 billion reached in 2006.

"President Roh said China's development is not a threat to Korea and is an opportunity," Chinese Foreign Ministry spokesman Liu Jianchao told reporters after the talks ended Tuesday. "He's looking forward to working with China in studying the possibility of forming a free-trade area."

Wen's Seoul visit, the first by a Chinese premier since 1999, will be followed by a trip Wednesday to Japan. 

The Chinese and South Korean leaders agreed to the hotline between their air and naval forces and also signed accords for environmental cooperation and cleanup, and for exchanges involving labor, youth and culture, the Chinese spokesman said, adding that "both sides agreed to increase cooperation for the sake of peace in Northeast Asia."

China surpassed the U.S. in 2003 to become South Korea's largest trading partner.

Wen, who landed in Seoul early Tuesday, toured SK Telecom Co.'s office in Seoul before meeting Prime Minister Han Duck-Soo in the Blue House. Wednesday, he'll take part in a lunch hosted by the Korean Chamber of Commerce before flying to Tokyo.

"Since establishing bilateral ties 15 years earlier, the two countries have been expanding exchanges in the political, economic and cultural fields at an unprecedented pace," Wen told Han. "I hope bilateral ties will continuously develop."

Visa Requirements

Wen instructed Chinese officials to look "positively" on the idea of lifting visa requirements for travel between China and South Korea, South Korea's Yonhap News reported Tuesday, citing comments he made when meeting Korea investors Tuesday. China also will allow direct chartered cargo flights between Seoul's Kimpo International Airport and Shanghai, Yonhap cited Wen as saying.

A free-trade agreement between China and South Korea may come well before a similar accord in northeast Asia, said Guan Anping, managing partner of Beijing-based law firm Anping & Partners and a former aide to Vice Premier Wu Yi when she was trade minister in the 1990s.

"Historical disputes and competition to be No. 1 in Asia may prevent Japan from signing onto China's proposal, but South Korea may be more open to the idea because South Korean companies would love to see more of their cars and products replacing Japanese products in the China market," Guan said.

The idea of closer economic relations may be a "hard sale" because South Korea is wary of a "rising China," said Peter Beck, the Northeast Asia director of the International Crisis Group, in an April 6 telephone interview from Seoul.

"As historical territorial disputes resurface, some people are asking whether China's rise is completely benign," he said.

'Ties Mean Survival'

Most South Korean business leaders look forward to "increasingly closer ties with China," Michael Sloan, an adviser to the Hanjin Group, which controls Korea Airlines Co., said in an April 4 e-mail. "Ties with China mean survival for the Republic of Korea in the future while Japan-U.S. relations are getting even stronger."

Korea Airlines is already "enjoying benefits such as open sky" in Shandong province in East China near the Korean border, where there are large congregations of South Korean- invested factories, Sloan said.