Chinese and Republic of Korea (ROK)companies are set to benefit from an even better business environment as the two countries vowed closer ties during a visit by Premier Li Keqiang to ROK, which ended Monday.[Special coverage]
Entering China in 1994, ROK construction machinery maker Doosan is embracing the fresh business opportunities afforded by urbanization in China as well as a free trade agreement (FTA) signed on June 1.
"The FTA cut tariffs on certain component imports from ROK. The lower production costs will make our excavators more competitive," said Park Chan Hyuk, general manager of Doosan Infracore China Co. Ltd.
Under the free trade agreement, ROK will eliminate tariffs on 92 percent of all products from China within 20 years, while China will abolish tariffs on 91 percent of all ROK goods.
The FTA, the largest bilateral free trade deal for China in terms of trade volume, covers 17 areas, including investment, trade in goods and services, and trade rules.
Less restrictions will help Doosan make the most of opportunities in the Chinese market as well as Southeast Asia and Central Asia markets, according to Park.
Doosan has a large factory in Yantai City, Shandong Province, which faces ROK across the sea and serves as a major gateway to economic cooperation between the two East Asia neighbors.
"Doosan aims to become one of the world's top three construction machinery makers by 2020. Thanks to the FTA, robust China business will be a major driver," said Park.
"The FTA is a milestone in the development of bilateral economic ties," said Li during his first visit to ROK as a premier.
Hyundai Motor Group is also upbeat about the Chinese market. In July, the ROK auto giant invested 290 million U.S. dollars in a R&D center in Yantai City.
The Yantai center is the only new energy vehicles (NEV) R&D center outside ROK for the global market. Its annual revenue is expected to be around 100 million U.S. dollars.
"ROK companies used to invest in labor-intensive industries in China. But now, they are shifting to high-end manufacturing and modern services," said Wang Lin, an investment promotion official in Yantai City.
ROK investment will increase in more regions and more sectors, Wang predicted.
Closer business ties will also benefit China as the two economies are complementary.
"Industrial upgrading is one of the best things created by China-ROK cooperation," said Niu Linjie, dean of the School of Korean Studies at Shandong University.
Chinese firms will be more involved in the global economy and they will move up the international industrial chain, he said.
China is ROK's largest trading partner and ROK is China's third largest trading partner. Bilateral trade was nearly 300 billion U.S. dollars in 2014, 60 times more than when the two countries established their diplomatic relationship in 1992.
Last year, 10 million trips were made between China and ROK. More than 1,000 flights travel between the two countries every week.
"The China-ROK relationship is at its best in history," said Li.
The two countries should fight economic woes together and work jointly for higher-level and win-win cooperation, said the premier.
"A huge common market with low tariffs is coming into existence. Enterprises from both countries will benefit," said Li.