Close Ties with China
Korea has a close relationship with China geographically, culturally and economically.
Korea is an ideal gateway to Asia’s largest market.
Korea and China have long enjoyed exchanges as close neighbors. More than 16 million people travelled between Korea and China by air, with visitors from China to Korea totalled 5.98 million in 2015.
Considering that China’s economic powerhouses of Beijing, Tianjin, and Shanghai are all located near or on the country’s eastern coast, it is more efficient, from a logistics standpoint, to source from Korea rather than Western China. Growing collaboration with cities along this coast is also expected to boost trade with Korean ports in Incheon and Pyeongtaek as well as new free economic zones in Songdo and Saemangeum.
Korea-China Air Passenger Traffic Growth
* Source : Korea's Ministry of Land, Infrastructure and Transport
Building on close economic ties
China is Korea’s largest market for exports and the second-largest foreign investment destination. Since the establishment of diplomatic relations, Korean companies have continued to invest in and accumulate essential experience from China. Korea has surpassed Japan to become China’s largest import market. With the conclusion of the Korea-China FTA in February, 2015, Korea is the only Asian economy to have FTAs with all three of the world’s largest markets—the European Union, United States and China. Korea will not only serve as a springboard for entering the Chinese market but also become a global value chain hub.
Korea’s export to China and portion of
Korea’s total exports
Unit : USD 100 mn (%)
* Source : Korea International Trade Association
China’s major import markets in 2015
Unit : USD 100 mn
Korean students comprise the largest contingent of overseas students in China. In 2015, Korean students in China outnumbered American students by a nearly 3-to-1 ratio, surpassing 60,000 to mark a nearly fourfold increase since 2001. Chinese students in Korea have also dramatically increased in number, with over 54,000 pursuing college or university degrees in 2015.
Foreign students in China by country
* Source : Institute of International Education (IIE), China Scholarship Council
Chinese Students in Korea
* Source : The Ministry of Education
The Korean Wave in China
As the Korean Wave has swept through China, Chinese companies have been actively embracing the cultural phenomenon as a marketing vehicle. As a result, Korean companies have benefitted from a “Made in Korea” premium in China. In 2015, Korea’s cosmetics exports to China jumped 101.5% from a year earlier, to USD 1.172 billion. Combined with exports to Hong Kong of USD 687.0 million, China accounted for 63.9% of Korea’s cosmetics industry exports. According to a report published by the Korea Foundation for International Culture Exchange (KOFICE) and KOTRA, the Korean Wave generated USD 7 billion in export and induced KRW 5.76 trillion in added-value and KRW 15.61 trillion in production in 2015.
Korea as an RMB hub
The Korean government is pushing to become a renminbi (RMB) hub by maximizing the Korea-China FTA. This will make for more convenient RMB transactions in Korea and significantly reduce the financial cost of doing business for traders in both countries. Growing trade in RMB priced products will provide investment opportunities as Chinese banks and global institutional investors expand or make new investments. As an RMB hub, Korea will have huge growth potential to capture a larger portion of RMB trading volume as the country continues to post trade surpluses with China of more than USD 60 billion annually. The combination of geographic proximity, convenient logistics, and direct RMB trade will serve as an engine for growth in the capital markets of both countries. With the conclusion of the Korea-China FTA and Korea’s emergence as an RMB hub, Korea is poised to be the ideal gateway to China, the rest of Asia, and global markets.