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Arrangement Boosts Links with Neighbors

China, Japan and South Korea are brewing an investment arrangement to expand the capital flows among the three countries.

The agreement can further intensify the economic integration between them and give a fresh start to free trade area (FTA) negotiations, analysts said.

Lu Jinyong, professor with the University of International Business and Economics, said the plan will give investment more freedom than what is written into the investment protection agreement the three countries signed.

Lu is entrusted by Ministry of Commerce to study investment arrangements among the three countries as part of a panel. The other two countries have also set up professional panels to study the model of the arrangement, which will be documented and submitted to the government leaders in October, according to Lu.

Officials from the three countries have had informal meetings in March in Japan, Lu said.

They will meet again in May in Seoul, July in Beijing and September in Tokyo.

Economic circles in the three countries have long talked about the FTA and gave applauds to the idea. But no official moves have been made.

Lu predicts all three governments will take initiatives on the issue in five years, because of irresistible economic integration.

Japan has been China's largest trade partner for 11 consecutive years and China also has been its second largest trading country for nine years. Their two-way trade totaled US$133.6 billion last year. The trade volume between South Korea and China reached US$63 billion last year.

A free trade zone would match all three countries' economies and make the zone one of the most competitive region in the world, said Lu.

Though there is opposition from some industrial groups, especially Japanese farmers, Lu believes the FTA will soon become a reality.

Compared to China and South Korea, the Japanese Government is more hesitant for it fears further opening of its market will hurt its fragile, high-cost agriculture sector.

As a result, Japan has made little progress in its bilateral free trade negotiations and put hopes on the multilateral trade system.

However, Japan is now adjusting its attitude in a bid to revive its sluggish economy as WTO talks stalled, Lu said.

Japan is about to conclude economic partnership agreements (EPAs), similar to FTA, with several countries.

The country signed its first EPA with Singapore in 2002 and has been holding separate negotiations with Mexico, South Korea, Thailand, the Philippines and Malaysia.

Japan's February exports to China grew 14.9 percent, while imports rose 5.2 percent. The trade balance with China of 13.71 billion yen (US$128 million) marked the first surplus since March 1994, according to Japan's data.

(China Daily March 29, 2004)

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