Free-trade talks ‘to be completed this year’
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Program Code: 0909346140507002 | Souce: Cntv
CHINA and South Korea issued a joint call for the denuclearization of the Korean Peninsula at a summit in Seoul yesterday and pledged to work toward concluding talks on a free-trade deal by the end of the year.
In a joint statement after their talks, Chinese President Xi Jinping and South Korean President Park Geun-Hye reaffirmed their “firm opposition” to the development of nuclear weapons.
While Park told reporters that the two sides had agreed to use “all means” possible to bring denuclearization about, Xi stressed that “dialogue and negotiation” was the best way forward.
Xi told Park that China upholds an objective and impartial position on the Korean Peninsula issue, and is firmly committed to pushing for a nuclear-free peninsula, maintaining peace and stability on the peninsula, and resolving the issue through dialogue and consultation.
Xi was making his first trip as president to the perennially volatile Korean Peninsula, and it was his second summit with Park, who visited China last year.
China and South Korea agreed measures that will expand the use of China’s currency and boost trade. Expectations are high that Xi’s summit with Park will expand an economic and business relationship that has flourished in the past decade.
Xi is accompanied by 250 business executives including Jack Ma, founder of the Alibaba e-commerce empire, and Robin Li, chairman of search engine Baidu. The Korea Chamber of Commerce said it was the biggest foreign business delegation to have visited South Korea to date.
A statement from South Korea’s finance ministry and its central bank said that the South Korean won was to become directly exchangeable with the yuan, joining major currencies such as the US dollar, Japanese yen and euro that are convertible with the Chinese currency.
The decision also makes the yuan only the second currency after the US dollar that is directly convertible with the won.
Park said South Korea and China will aim to complete long-running free trade talks by the end of this year.
“Through these measures, exchange between companies and citizens in the two countries will become faster and more free,” she said.
China also gave South Korea the green light to invest tens of billions of yuan in Chinese bonds and stocks.
The currency agreement is another step forward in China’s ambitions for the yuan to rival the US dollar as the favored currency for trade and financial transactions. Chinese leaders say they plan to let the yuan float freely, but analysts say that might be decades away.
The government is reluctant to allow big changes in the currency for fear of hurting exporters that employ millions of workers.
South Korea’s two-way trade with China was US$229 billion last year, exceeding the combined value of South Korea’s trade with the US and Japan.
Xi told reporters after the summit that the two countries will strive to boost their trade to more than US$300 billion.
China is also a crucial market and a production base for South Korean exporters such as Samsung, Hyundai and LG who are key foreign investors for China.
But nearly all South Korean exporters and importers use the US dollar to do business with their Chinese counterparts because the won and yuan aren’t directly traded, incurring additional costs. More than 90 percent of exports and imports with China were transacted in the US dollar in 2013, according to the Bank of Korea.
South Korean policy-makers have said they would like to make Asia’s fourth-largest economy become a major center for trading the yuan, vowing to complete infrastructure for such a market this year.
Officials said the currency agreement gives Seoul an edge over Hong Kong and Singapore, two other Asian financial centers with yuan ambitions.
South Korea and China also announced new measures to boost South Koreans’ use of the yuan for investment and saving. South Korea previously relied on a bank in Hong Kong to settle yuan payments, but a Chinese bank in Seoul will now take on that role. That will help increase yuan savings in South Korea and reduce transaction fees, officials said.
China agreed that South Korean institutional investors approved by local authorities will be able to invest up to 80 billion yuan (US$13 billion) in Chinese stocks.
The ongoing free trade talks between the two countries also got a boost from Xi’s visit.
China and South Korea have held about a dozen rounds of negotiations over removing tariffs on goods and services but they still have not narrowed their stance on some issues, such as opening South Korea’s agricultural industries.
All these moves will push South Korea closer to China, while Seoul has made little headway with Japan.
For Samsung Electronics Co, China last year overtook South Korea as a bigger revenue generator, accounting for about one fifth of its revenue, nearly twice as much as revenue from its home market.
Samsung’s sales from China surged from 23.1 trillion won (US$23 billion) in 2011 to 40.1 trillion won in 2013. Sales in South Korea shrank from 26.5 trillion won to 22.8 trillion won over the same period.
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