China, South Korea declare effective conclusion of free trade deal

China's President Xi Jinping (right) with South Korea's President Park Geun Hye  during a meeting at the Great Hall of the People, on the sidelines of the Apec meetings, in Beijing, on Nov 10, 2014. -- PHOTO: REUTERS
China's President Xi Jinping (right) with South Korea's President Park Geun Hye  during a meeting at the Great Hall of the People, on the sidelines of the Apec meetings, in Beijing, on Nov 10, 2014. -- PHOTO: REUTERS

BEIJING (REUTERS) - Chinese and South Korean leaders said on Monday that the two countries have "effectively" concluded a free trade agreement (FTA) that will remove or sharply reduce barriers to trade and investment between the two trading giants.

The deal follows more than two years of negotiations between the two neighbours on opening their markets wider to each other, although there remains some scepticism in South Korea about a swift passing through the country's parliament.

"South Korean and Chinese leaders today declared an effective conclusion of the FTA at a summit meeting held at the Great Hall of the People in Beijing," a statement from South Korea's presidential office quoted spokesman Min Kyung Wook as saying.

The statement did not provide details of the agreement but said South Korean President Park Geun Hye and Chinese President Xi Jinping were due to attend a signing ceremony later on Monday to confirm the conclusion of the negotiations.

The agreement comes as South Korea has yet to decide whether to join the United States-initiated Trans-Pacific Partnership (TPP) pact, aimed at slashing trade barriers between a dozen countries.

China is the world's largest exporter and South Korea ranks seventh.

South Korea already has free trade agreements with the United States and the European Union. An official at Seoul's trade ministry said the agreement with Beijing was not final while China's Xinhua news agency called it a conclusion of substantive negotiations, indicating some fine-tuning has yet to be done.

South Korean media reported that the two countries have agreed to exclude rice from the deal, usually the thorniest issue in South Korea's trade negotiations with foreign countries. Xinhua reported the agreement covers 17 areas including online commerce and government purchasing.

China and South Korea normalised diplomatic relations in 1992 and bilateral trade grew 36-fold to US$228.92 billion (S$295.2 billion) in 2013 from just US$6.38 billion in 1992, South Korea's data shows.

South Korea has been running a trade surplus with China since 1993. In 2013, the surplus was US$62.8 billion. Analysts in Seoul have said the deal would have only a limited direct boost to bilateral trade or economic growth but would help South Korea strengthen ties with China, the sole major ally of North Korea.

The two Koreas remain technically at war after their 1950-53 war ended in a truce and China is the host of six-party talks aimed at diffusing tensions over Pyongyang's nuclear development ambition.

The talks, which also involve the United States, Russia and Japan, have been stalled for years.