Since the global financial and economic downturn in 2008-2009, China, Japan, South Korea, and many other East Asian countries have begun to accelerate trade liberalization and economic cooperation in East Asia. Presaging this cooperation, China and South Korea have been developing their bilateral trade relationship over the last decade. First, China became South Korea’s largest trade partner in 2003, replacing the United States. Then trade volume between China and South Korea reached $160 billion in 2007, or 32 times higher than it was in 1992 when two countries established formal diplomatic ties. More recently, during Chinese President Hu Jintao’s state visit to South Korea in August 2008, the two nations agreed to make efforts to increase bilateral trade to $200 billion per year by 2012.
In 2006, even before the recent downturn, China stressed the need to push forward free trade agreement talks. Beijing seeks a Free Trade Agreement (FTA) with Seoul to help reduce its long-term trade deficit with South Korea. Though South Korea has generally favored bilateral FTAs, the previous Roh Moo-hyun administration in Seoul was reluctant to rush into an FTA with China due to fears that low-priced Chinese agricultural products could hurt Korea’s domestic market.