China's Growing Trading Power Poses Risks for Korea

      January 14, 2014 12:51

      China's annual trade volume totaled US$4.16 trillion in 2013, up 7.6 percent compared to the previous year, which means it has almost certainly overtaken the U.S. as the world's No. 1 trading nation.

      Since joining the World Trade Organization in 2001, China has seen exports soar more than 20 percent a year. In 2009, it beat Germany to become the world's largest exporter and since 2010 it has surpassed Japan in GDP to take the No. 2 spot.

      China economic prowess has so far grown within the framework of the WTO, led by the U.S., Europe and Japan, or via free trade agreements. But at the same time China has demonstrated an ambivalent attitude by demanding to be recognized as a developing country when it finds itself at a disadvantage.

      But from now on, China will attempt to shift global trade rules to suit its needs, powered by its strong purchasing power and control over vast export markets. Since Korea is currently engaged in FTA talks with China, it needs to pay close attention to Beijing's increasing clout on the global trade scene.

      Late last year, China declared a new Air Defense Identification Zone that partly overlaps with Korea's and Japan's, creating the potential for future disputes. It also dispatched battleships to the Spratly Islands. Those moves suggest that Beijing will use force if necessary to protect its valuable trade routes. There will soon be heated competition to dominate the Malacca Straits, through which 30 percent of global crude oil transport takes place.

      Korea exported $183.1 billion worth of goods to China last year, more than Japan's $162.3 billion to become the top exporter there. That has resulted in a record current account surplus for Korea and three straight years of annual trade surpassing $1 trillion. But that means Korea's economy could be now at any time suffer a fatal blow if China uses its economic, diplomatic and military muscle as the world's largest trade power. The time has come for Korea to examine whether its growing business relationship with China is entirely a good thing.

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