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Free trade agreements that will transform China Inc (A)

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Core Tip:With FTAs with South Korea and Australia taking effect, Chinese firms seek to switchgears to compete globally
 
Free trade agreements that will transform China Inc

Participants take part in a kimchi making event during the Seoul Kimchi Festival outside the city hall inSeoul.

 

With FTAs with South Korea and Australia taking effectChinese firms seek to switchgears to compete globally

China's free trade agreements with South Korea and Australiawhich took effect last monthareexpected to encourage struggling domestic manufacturers to further upgrade their technologytoreturn to previous levels of export growth.

It is early days stillbut the FTAs will likely have profound economic implications for ChinesecompaniesThe FTAs come at a critical time when many economies are taking decisivemeasures to compete with ChinaCountries are keen to enlarge their export volume through newtechnologiesmodernization of their services sectorinvestments in Southeast Asia and effectivemarketing strategies.

Shin Un-cheolchairman of the South Korea-China Marketing Associationsaid despite the priceadvantage being a core element in bilateral tradeit does not automatically mean cheaperChinese productslikesaypickled vegetable and garlic productswill benefit from the FTA.

"On the contraryChina's packaged food industry will face challenges," Shin said. "South Koreanpickled vegetables and senate chicken soup may gain because of the FTA."

As per the China-South Korea FTAChina will remove import tariffs on 91 percent of SouthKorean products over the next 20 yearswhile Seoul will eliminate tariffs on 92 percent ofChinese goods.

South Korea's Ministry of Strategy and Finance said that China-South Korea annual tradevolume is expected to reach $300 billion by the end of this yearthanks to the FTA pact.

As per the China-Australia FTAChinese import tariffs on 95 percent of Australian exports havebeen liftedwhile obstacles will be removed to allow more Chinese businesses to invest DownUnderVisas will be also relaxed for Chinese visitors.

Shin said compared with South Korea's businesses related to travelmedical servicespost-retirement lifefilmstelevision and entertainmentChina is relatively weak and will face seriouschallenges.

"If these industries in China don't raise their level of service and qualityconsumers will feel theyare losing out," said Shin. "Alreadythe China-South Korea FTA has attracted the attention ofChinese film and television peopleInvestment of Chinese enterprises in South Korea will seeexplosive growth."

Dereck Jisenior partner of Roland Berger Strategy Consultantssaid Chinese manufacturers nolonger can rely on low-cost material and cheap labor advantage to compete with foreign rivals.

"An open market doesn't mean lower price and low value-added productsbut brands,technologies and strategic market approaches for Chinese companiesThey need to put theirbusiness growth on a firmer footing," said Ji.

He said the FTAs can persuade large Chinese companies to upgrade their operationsSmalland medium-sized companies could also benefit.

 

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