Ties strengthen in view of deal
Free-trade agreement to be signed between China and Korea this year leads to surge in investment, writes Mukul Munish
South Korea has spawned global brands, such as Samsung, LG and Hyundai, that are household names the world over. In Hong Kong, mobile brands such as Samsung and LG are popular with consumers.
South Korea and Hong Kong, along with the mainland, are major trading partners. Last year, during the Asia-Pacific Economic Cooperation (Apec) CEO summit in Beijing, South Korea and China negotiated the Korea-China Free Trade Agreement (FTA) which will be institutional support for Korean businesses in Hong Kong and the mainland in the future.
Trade between South Korea and Hong Kong received a further boost when Chief Executive Leung Chun-ying visited South Korea last November. The two trading entities inked a Memorandum of Understanding intended to lead cooperation in cultural industries.
Cho Yong-chun, consul general of the Republic of Korea in Hong Kong, says the two governments will make further efforts to promote trade, adding that there are limitless opportunities.
Cho says the two trade giants have been cooperating on a global scale and working as partners in terms of trade and industries over the past decade. According to last year's trade data, Hong Kong was the seventh largest investor in South Korea. Hong Kong was the third biggest investment destination for South Korean companies. According to the Hong Kong Trade Development Council, about 1,700 Korean companies had offices in the city. Trade between Hong Kong and Korea is now worth about US$30 billion.
Given that the economies are similar, and focused on trade for growth and development, there is limitless potential of mutual cooperation. Korea is renowned for its heavy industries and competitiveness in manufacturing, while Hong Kong is a regional financial services hub, and home to top international financial institutions from all over the world. These factors will further develop trade between the two economies.
As far as mainland China is concerned, its investment in South Korea is surging ahead thanks to the upcoming free-trade agreement between the two countries.
According to Mergermarket, an international provider of financial information, China's investment in South Korea jumped 374 per cent to US$631 million last year from US$133 million in 2013. This compared with just US$28 million in 2010.
So far this year, China's investment in South Korea has nearly doubled compared with the whole of last year, with Anbang Insurance Group's US$1 billion acquisition of 63 per cent of Tong Yang Life Insurance, a South Korean insurer, being the biggest single transaction.
Jennifer Zhang, a Shanghai-based financial researcher at Mergermarket, says since 2013, the volume and value of Chinese investment in South Korea has increased because of the upcoming free-trade agreement between China and South Korea.
"China's investment in South Korea will keep increasing because everyone is expecting the free-trade agreement to be signed later this year, which will be helpful to investment between both countries," Zhang says.
Last month, China and Korea completed their free-trade agreement talks and drew up a draft resolution, the Chinese Ministry of Commerce announced.
In November last year, the ministry said the agreement would be signed this year and would take effect in the second half.