A free trade pact between China and South Korea, which is closer to reality after the two nations reached a broad understanding this week, could be seen as Beijing’s punishment to Taiwan, a thing which Hong Kong should take note of, columnist T Y Ko wrote in the Hong Kong Economic Journal.
China’s free-trade initiative with South Korea — the two countries are expected to sign a final agreement next year — will affect Taiwan’s exports, given that Taiwan and South Korea have 77 percent of their export goods overlapping with each other.
It is estimated that Taiwan may lose as much as NT$650 billion (US$21.18 billion) a year in economic terms, dragging down the gross product value of the island’s manufacturing sector by 3.85 percentage points.
With the deal, China has made it clear that it can harm Taiwan economically if the island stirs up political issues.
That would also send a signal to Hong Kong, where pro-democracy protests are now into their seventh week.
On Monday, leaders of China and South Korea inked the outlines of a free-trade deal after more than 30 months of discussions.
Under the agreement, China will waive tariff on most Korean imports and Seoul will do the same in return. The deal excludes a few items such as automobiles and agricultural produce.
A total of US$137.1 billion worth of tax on Korean goods would be waived based on the export value to China last year.
Taiwan, meanwhile, has yet to get any tariff waiver from the Economic Cooperation Framework Agreement with China despite discussions since 2009, way earlier than Beijing began its talks with South Korea.
Anti-Beijing protests by Taiwan students have made China take a pause on initiatives related to the island.
As for Hong Kong, students here have shown no signs of letting up on their democracy campaign.
While the Shanghai-Hong Kong Stock Connect is set to kick off despite the Occupy protests, the Hong Kong government should seek to resolve internal conflicts and avoid taking the same path as Taiwan that will hurt the economy, Ko wrote.
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