South Korea-China Trade Relations: Problems and Prospects

Abstract

One of the most dramatic developments in Northeast Asia during the 1980s has been the burgeoning trade between the Republic of Korea (ROK) and the People's Republic of China (PRC). Trade began on an informal, almost secretive basis with most transactions routed through Hong Kong, but within a few short years it was being conducted openly with Korean ships carrying cargo directly from South Korea to ports in northern China. China's participation in the Seoul Olympics improved political relations between the two countries, and in the spring of 1989 they exchanged trade missions. PRC-ROK trade has reached a level of at least $1 billion per year, more than twice the value of China's trade with its long-standing ally, North Korea. In the first section of this article I describe the current nature of South Korea's trade with China and then explore the economic potential for expanding this trade. The second section considers the political and economic factors within China that will influence the development of trade with the ROK, and section three similarly examines political factors within South Korea. The final section argues that direct investment by South Korea into China, which is already occurring on a limited basis, can alleviate many of the problems standing in the way of greater trade.