Finding a Way to Make Neighborly Profits
January 15, 2015

In a recent interview with Seoul Economic Daily, Professor Liu Jing, Associate Dean of CKGSB, talked about China’s economy, Asia’s economic integration and the economic relationship between China and its neighbors. He emphasized that an Asian economic integration is not a choice, but an integral part of today’s environment.

With regard to the new Korea-China FTA, Prof. Liu said it is important to under the context of China’s political situation. Since the purpose of the US-backed Trans-Pacific Partnership (TPP) is to exclude China from a large economic bloc, the Korea-China FTA becomes more important from a Chinese point of view. China does not want to be excluded from the TPP, so to deal with this, China needs to keep its economic communication channels with the US open, while at the same time negotiate trade agreements with neighboring countries. As a result, the Korea-China FTA can work as a defense mechanism when the United States’ TPP becomes a reality.

According to Prof. Liu, it is possible to keep a balanced trade strategy between Korea and China, while Korea maintains its political alliance with the United States. For Korea, it is important to maintain amicable trade relations both with China and the US. China and the US are competitors, but they are also in a cooperative relationship. Korea, which is open to both China and the US, can then enjoy advantages as a neutral party.

Prof. Liu also explained China’s rapidly increasing debt levels, though he stressed it is not a serious problem. Most of the debt in China is caused by investment. The three key factors for economic development are investment, consumption and export. Currently, China’s major concern is the slowdown in exports which has resulted from stagnant overseas markets. As domestic consumption growth increases by far less than the government expected, exports should ideally be expanded by investment, while debt is followed by increased investment. However, in a wider context, China’s debt issue is controllable and is less serious than the debt problems in many other countries.

To view the original article in Korean, please click here.

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