Trade between China and South Korea increased from US$6.4 billion in 1992, when the two countries established diplomatic relations, from $6.4 billion in 2014 to $235.4 billion. China has been South Korea`s No.1 trading partner since 2004. South Korea is China`s fourth largest trading partner since the same year China has become aware of China`s ASEAN free trade agreement. However, given the effective division of the legal and tax professions in China, few law firms are familiar with Chinese free trade agreements and, therefore, ignore them when they structure foreign investment in the country. This is problematic because the identification and ability to use existing free trade agreements should often be taken into account in the statutes – and be negotiated in advance with customs and tax officers in China. Otherwise, there may be general tax costs that are far from necessary. Some consultants are also known to have deliberately chosen to withhold such data in order to prevent an CPP investor from becoming interested in external markets and losing his client in another country, perhaps better suited to the client`s needs. Many Chinese advisers are simply not aware of the importance of free trade agreements between China and even of the procedure that followed the creation of a Chinese company with local customs authorities, including the intention to invoke the status of the treaty as part of an applicable free trade agreement. If this is not the case with customs registration in China, the company may lose all the contractual benefits to which it is truly entitled. Under the free trade agreement, about 99.7% of Chinese exports to Switzerland will be zero tariffs and the free share of tariffs on Swiss exports to China is 84.2%. The 2015 deadline is of paramount importance to China, as it also includes Vietnam, which has gradually become an alternative target for production to China. With Vietnamese wages, which currently earn about a third of wages in southern China, the production capacity of products eventually destined for the Chinese market is increasingly finding its way to Vietnam.
Details of the China-ASEAN free trade agreement can be found at our ASEAN briefing site, which also contains regular updates to Chinese tax treaties throughout the region. Knowledge of products that can now be manufactured outside China and manufactured at a lower cost, but imported into the country duty-free, is a strategic and economic issue for many manufacturers. Foreign producers are automatically eligible for the ASEAN treaty by staying in an ASEAN nation (such as Vietnam), the qualification requirement being purely geographical. Chinese Trade Minister Gao Hucheng (l.) shakes hands with his South Korean counterpart, Yoon Sang-jick, after the signing of the agreement on June 1, 2015 in Seoul.