|Title||New Directions for Korea-China Economic Cooperation: Strategy and Policy Suggestions|
|Author||Soojoong Nam, Yunjong Wang, Soonchan Park, Soong Chan Park, Jungwon Cho, Jeong-In Kim, Jong Suk Choi, Dae-Won Oh, and Jeong Weon Yu|
|Series||Policy Analyses 18-30|
President Moon Jae-In proposed the three principles and eight ways of cooperation for new economic cooperation strategy with China. The three principles and eight ways of cooperation are the basic directions and guidelines for the Korean government to develop economic cooperation with China in the future. This study puts forward detailed measures for cooperation in major areas, taking full consideration of changes in internal and external conditions surrounding the Korean and Chinese economies.
First of all, there is a need to enhance the stability and substantiality of bilateral cooperation by improving and consolidating the existing institutional frameworks in order to secure the stability and substantiality of the Korea-China economic cooperation. It will be necessary to maintain a two-way dialogue channel that requires the government to push forward future-oriented cooperation through a Korea-China economic ministers’ meeting centering on the Ministry of Strategy and Finance, and that sensitive trade issues be raised through a joint committee on the Korea-China FTA. In addition, working-level consultations will have to be continued so that cooperation can be materialized in the direction of achieving substantial results. In order to do this, it is necessary to actively utilize Korean, Chinese experts and provide a communication platform for spreading consensus and securing trust through public diplomacy.
To suggest ways for enhancing the quality of trade between Korea and China, we analyze the participation in GVC at the national- industrial level and examine whether such participation contributed to upgrading the economic and industrial structure. We use data on 18 manufacturing industries in 43 countries from 2000 to 2014, and analyze whether forward participation and backward participation contributed to the value-added generation of industries.
In addition, the results of our analysis on Korean and Chinese industries are similar to those of the rest of the world. Particularly, it is shown that forward participation has a relatively greater positive effect on the creation of value added in the industry compared to reward participation. In the context of GVC proliferation, measures to enhance the quality of trade between the two countries through industrial development and upgrading of economic structures can be summarized as GVC participation and upgrading.
In the face of the 4th Industrial Revolution era, Korea and China have also proposed ways to cooperate in new industrial sectors. Witnessing the changes caused by the 4th Industrial Revolution, the status of development of new industries in China was analyzed with a focus on artificial intelligence (AI). Major analysis items related to new industries include promoting strategies, size and characteristics of investments, analysis of major business cases, problems and limitations, major AI technology applications (AI+), and comparison with major countries. Considering the limitations of government statistical data, we compare the competitiveness of Korea and China, such as global market share, revealed comparative advantage index and trade complement index, focusing on six new industries (intelligent robots, system semiconductors, electric vehicles, aviation- space, advanced medical devices, lithium). The cooperative cases of the New Industrial Sector in China were largely classified into three types: first, they were classified into vertical integration types, in which relatively recent leading companies led investment; secondly, global cooperation; and thirdly, government-led types that cooperated with foreign companies in the form of strategic alliances, etc. Considering each type of the cooperation cases, we propose the cooperation plans as follows: first, to develop a system for fostering and supporting start-up companies with vertical integration with major Chinese large companies; second, to support small and medium- sized enterprises with technological superiority and to establish an innovation system with which core components and intermediate goods can be supplied; and third, to target the Chinese market and overseas markets through strategic alliances with leading Chinese companies in the AI field.
The Korean government emphasizes the importance of revitalizing start-up ventures in order to secure future growth engines and create jobs for young people, meaning there is a need for cooperation with China. China has also started to popularize startups and innovations under the banner of 'popularization of startups, human innovation' . The background of the Chinese government's start-up venture started from the increasingly high level of inflation, the elimination of real unemployment, and a desperate measure to upgrade the economic development centered on small- and medium-sized venture businesses and the Chinese-style innovation model through startups. We analyze the changes and growth contents of the startup venture ecosystem of China, which led to innovation and job creation in China and examined the direction of government-led core platform innovation, and based on this we propose the methodology of mutual win-win through open innovation cooperation and joint fund-raising between Korea and China.
With regard to cooperation in the energy sector between South Korea and China, the two countries are facing a difficult situation after the global financial crisis. In the renewable energy sector, energy cooperation between Korea and China is not as easy as it used to be due to the capital increase of local Chinese companies, advances in domestic and overseas markets based on mass production and sales of cheap products, and the support of the central government and policy financial institutions for major domestic and overseas projects. In order to reflect the demand for energy cooperation between the two countries, the central governments of Korea and China have already made efforts for energy cooperation, but to further boost cooperation, they have proposed the nationwide spread of carbon emission trading by the Chinese central government, the process of promoting new energy generation outside of GEI, solar and wind power, and the development of new energy technologies and the use of opportunities for building energy infrastructure in China. In addition, Korea and China should reduce their reliance on thermal power, increase the proportion of renewable energy centered on solar and wind power, and emphasize the institutionalization of cooperation measures.
Environmental cooperation between Korea and China has greatly expanded over the past few years. However, the lack of detailed information on the areas concerned, together with the systems implementation and methods of work in place at the Ministry of Environmental Protection, Forestry, National Development and Reform Commission and its affiliates, which are the main departments responsible for China’s environmental policy, has been a source of distress in the process of promoting cooperation. China is rapidly changing its environmental policies for the implementation of the Environmental Protection Act, the Air Pollution Prevention Act, and the announcement of action plans to improve air and water quality. This change in China’s environmental policy means a change in China’s policy demand in Korea-China environmental cooperation, and will pose challenges and provide new opportunities for environmental cooperation between Korea and China. Impacts from environmental pollution among countries are expected to increase from economic growth with pattern in resource use. It is necessary to review the environmental policies of China and Korea in order to enhance the efficiency and effectiveness of environmental cooperation between Korea and China to overcome environmental issues. As a solution to the environmental problems that the two countries can jointly strive for, the government has proposed to improve the constitution of eco-industrial development, which increases the efficiency of resource use and minimizes environmental pollution by reusing unused or by-products as raw materials or energy of other companies. It will be necessary to share the experience of implementing programs such as China’s circular economic complex (CIP) and domestic ecological industrial complex and analyze the transition to a clean production system through the efforts of various technological development and information exchange. We also emphasize the need for environmental cooperation between Korea, China, and also Japan to address current environmental issues including air quality. Other proposals include cooperative measures for sharing technologies, experiences and policies for building eco-friendly cities.
The joint entry into infrastructure projects in third countries was analyzed based on China's one-to-one policy. The one-to-one policy aims to expand logistics networks through infrastructure investment in areas of economic interest by China, develop China's borders and expand its influence on neighboring countries. Since then, the Chinese government has signed agreements with more than 30 countries to materialize the one-on-one policy implementation. International cooperation is ongoing, including Indonesia's Bandung High Speed Railway, Hungary-Serbia Connecting Railway, China-Russia Natural Gas Eastern Line Corporation, Pakistan's Gwadar Port development and Kazakhstan's Yanun River Logistics Base. South Korea has been lacking in connectivity with one-to-one policy, but the recent improvement in the North Korean nuclear issue has caused a sharp rise in the Korean Peninsula's logistics program. Accordingly, we expect the necessity for three north-eastern provinces cooperation in international logistics policy, including Russia, Mongolia and South Korea. We review the three country’s pilot projects of joint advancement between China-Japan and analyze its major issues, also going on to seek a strategy of joint advancement and ways of cooperation between Korea and China for infrastructure projects.
Lastly, in the area of promoting human-centered private exchanges and cooperation, we discuss the Chinese people’s current expectations of Korea, and the needs and necessities felt by the Chinese people. If the Korean and Chinese people could together resolve the deficiencies and dissatisfaction they commonly feel, the friendly relations between the two countries will continue to grow in the future. For this, first, this study analyzed the limitations and problems shown in the private exchanges between Korea and China, and suggested improvement measures. As an example of a ‘human- centered private exchange’ project, this study suggested projects to resolve environmental issues and cultivate talent, mainly because environmental issues have recently had the largest negative impact on mutual perceptions due to keen public interest in both countries. The Korean government should establish a system to raise the level of active exchange in the private level, and also futher develop its dialogues with the Chinese government to compose a platform that could spread the outcomes of individual projects. Human-centered private exchanges could be finally accomplished by introducing the process of solving realistic problems in which the people of both countries share great interest through private exchanges.