As Beijing pushes for China-Japan-South Korea trade pact amid US tensions, hurdles remain

Chinese Minister of Commerce Wang Wentao speaks at the 2025 Asia-Pacific Economic Cooperation (APEC) CEO summit in Gyeongju, North Gyeongsang Province, Oct. 31. AP-Yonhap

As Beijing continues advocating for deeper regional economic cooperation in East Asia amid ongoing tensions with Washington - including by working towards a free-trade agreement (FTA) with Japan and South Korea - analysts say that making substantial progress remains challenging, given the existing trade framework and conflicting interests.

In a meeting with South Korean Minister of Trade, Industry and Energy Kim Jung-kwan on Saturday on the sidelines of the Asia-Pacific Economic Cooperation (APEC) forum, Chinese Commerce Minister Wang Wentao pledged to promote the resumption of negotiations on a trilateral FTA involving the two countries and Japan, according to a statement from China's Ministry of Commerce.

Meanwhile, China and South Korea should enhance communication through existing export-control and supply-chain mechanisms to ensure the smooth operation of supply chains between the countries, Wang said.

The trilateral FTA has been on the cards for more than two decades, and official negotiations were formally launched in 2012 but have been stalled for the past few years, in part due to the Covid-19 pandemic. Still, the three countries are all members of the existing, though less comprehensive, Regional Comprehensive Economic Partnership (RCEP).

While the idea of resuming negotiations was already floated last year during a trilateral leaders' summit, both Japan and South Korea now have new leadership.

Alicia Garcia-Herrero, chief economist for the Asia-Pacific region at Natixis, said the newly elected Japanese prime minister, Sanae Takaichi, has cast a shadow over the prospects of the FTA.

"It will be very difficult, because Takaichi has been very accommodating to [US President Donald] Trump ... so, I don't think she's going to get into this," Garcia-Herrero said.

Meanwhile, the potential costs of such an FTA would outweigh gains for both South Korea and Japan, as China imports much less from the two countries because it is producing what they used to sell to China, she said.

"I would not give a big probability to this [FTA] happening. And if something is announced, it will be really watered down," Garcia-Herrero added.

But Lian Degui, director of the Centre for Japanese Studies at Shanghai International Studies University, said Japan's new government is unlikely to adopt a passive stance towards cooperation with China and South Korea, despite its right-leaning position.

"Although the trilateral free-trade negotiations will not proceed entirely smoothly, the prospects remain optimistic, as this is a shared goal among the three countries," Lian said.

Su Yue, principal economist for China at the Economist Intelligence Unit, said Takaichi's government could become more pragmatic and less hawkish in its dealings with China, so all three countries could be willing to further engage against the backdrop of intermittent US tariff threats.

"The issue, however, is that China, Japan, and South Korea are already part of RCEP, so if you want these three countries to take further steps now, I think the room for additional progress might be quite limited," Su said.

President Lee Jae Myung, right, shakes hands with Chinese President Xi Jinping upon Xi's arrival at the Gyeongju Hwabaek International Convention Center, the main venue for the Asia-Pacific Economic Cooperation Leaders Meeting, in the city of Gyeongju, Friday. Yonhap

Potential highlights of the trilateral FTA could lie in areas related to services and digital trade, she added.

The People's Bank of China announced on Monday that it recently renewed a bilateral local-currency-swap agreement worth 400 billion yuan ($56.2 billion) with the Bank of Korea, which will be valid for five years.

It added that the currency-swap renewal will help further deepen monetary and financial cooperation between the two countries, facilitate bilateral trade and maintain the stability of financial markets.

Also on Saturday, during his talks with South Korean President Lee Jae-myung, Chinese President Xi Jinping called for accelerating second-phase negotiations of the bilateral China-South Korea free-trade agreement, according to Xinhua.

Wang also met with Japan's minister of economy, trade and industry, Ryosei Akazawa, on Thursday on the sidelines of the Apec forum, where he urged Japan to promptly remove relevant Chinese entities from its export-control end-user list, China's Ministry of Commerce said in a separate statement.

Japan has progressively tightened export controls on high-end semiconductor manufacturing equipment over the years, with Chinese entities a primary target.

The tightening restrictions are not just because of pressure from the US, as countries such as Japan and South Korea would also be reluctant to see China's rapid progress in the sector, according to Garcia-Herrero.

"The Japanese and the South Koreans believe that if China moves up the ladder, especially in AI chips, it's over for them," she said.

Meanwhile, Akazawa expressed strong concern over China's rare earth export controls during the meeting, according to Japanese news agency Jiji Press.

Read the article at SCMP.