The Speech of Mr. Seok Tong-youn, Consul-General of the Republic of Korea in Hong Kong on January 31, 2008 at University of Hong Kong
The Rise of China and Korea-China Relations: What Next?

It is an honor to present my views on China and Korea-China relations at such a prominent school with a long history and proud tradition.

Visiting a university is always so refreshing. The campuses are always buzzing with energy and hope. I am reminded of how precious youth is. I say this with hopes that you will cherish this moment, which is the golden age of your lives.

Today, I would like to discuss two main points: One, where is China now and where is China headed to? Two, where are Korea-China relations now and where are they headed to?

They are not only questions that I have been asking myself for a long time as a diplomat involved in China affairs. They are also questions that are very pertinent to Korea as what happens to China has a direct impact on Korea.

Today, I would like to share my views with you regarding those questions from a practical perspective, based on my experience on the job as a diplomat.

First, let us examine, “Where is China now, and where is China headed to?”

China’s Economy: Present and Future

1. Background

We all know that 2008 is no ordinary year for China for two main reasons: one, China celebrates thirty years of reform and opening up; and two, in less than 190 days, China will host the Beijing Olympics. Since embracing reform and opening up, China has accomplished immeasurable growth, and the Olympics will exhibit to the world just how far China has come. While the world marvels at China’s achievements thus far, China will plan its next phase of advancement. China is rightfully proud of its success, and uses that as a platform for its aspirations to rejuvenate China and become a superpower. Those ambitions were hinted in the two CCTV programs: ‘The Rise of Great Nations (大國崛起)’ (produced as a series by CCTV and aired in 2006) and ‘Road to Revival (復興之路)’ (which aired immediately before the 17th National Congress and drew tremendous audience). President Hu Jintao also declared in his address at the 17th National Congress his intent to realize the dream of “a great rejuvenation of the Chinese nation.” How did China become such a formidable nation? What makes it possible for China to proclaim such ambitions? I believe the success of reform and opening up is the bedrock of China’s confidence and ambition.

2. China’s transformation after 30 years of reform and opening up

Thirty years ago, in 1978, at the Third Plenary Session of the 11th Central Committee of the Communist Party in December, Deng Xiaoping declared reform and opening up in China. Since then, China’s economy grew at an unprecedented rate of 10% year after year. Reform and opening up completely transformed China. China went from a backward agrarian economy to a modern commercial and industrial nation. In just three decades, per capita GDP grew by approximately 40-fold from a mere 50 Dollars to over 2,000 Dollars in 2006. Trade volume, which was no more than 20 billion Dollars in 1978 grew by 100 times to 2 trillion Dollars in 2007, placing China third in world ranking after the US and Japan. China is #1 in terms of foreign reserves, which stands at 1,400 billion Dollars. With the abundant foreign reserves, China has set up a sovereign fund, CIC, becoming a key player in the international financial market. The world is also amazed by China’s sophisticated level of science and technology. In 2007, China shot into orbit Chang’E to probe the moon. In addition to its competitiveness in military technology, China is rapidly catching up with the advanced nations in industrial technology.

3. Rise of China is a reality

Based on its remarkable economic growth over the past three decades, China is also becoming a formidable force in international diplomacy and politics. The rise of a wealthy and powerful China is changing world dynamics. For example, in 2005, Beijing hosted the Forum on China-Africa Cooperation, in which 48 heads of state participated. In fact, it was unprecedented in that all African states, with the exception of a few that have diplomatic ties with Taiwan, were present at the forum. China shocked the world with a fine display of its elevated international status. China’s diplomacy vis-à-vis its neighbors and multilateral diplomacy are also gaining widespread attention. Within the region, China is leading the ASEAN+3, ASEAN+1, and EAC. At the same time, China strives to become the focal point in Southeast Asia, Central Asia, and Northeast Asia through the SCO and Six-party talks. Both in international organizations, such as the UN, and regional organizations, such as APEC, China is not only gaining voice, but also expected to increase its participation and share. What does all this mean? Simply put, “the rise of China.” At this point, it is a given fact and a clear reality. At one point, some experts forecasted a looming crisis in China. Now, those arguments have been silenced, while all the talk is focused on the rise of China and how to perceive of and cope with that reality. Is the rise of China a blessing or a curse? Depending on what situation you are in, responses greatly vary. Should you jump on the bandwagon of the rising China? Should you keep the rising China in check? Should you be hedging in order to avoid the possible risks? It would be very interesting to discuss all of them, but that would expand the scope of my talk too much, so I shall leave that an open question. However, I will give you the Korean perspective when I move onto Korea-China relations. For those of you that are impatient, let me give you the conclusion first. I believe the rise of China is an opportunity rather than a threat, and I believe Korea needs to take full advantage of the rise of China. The wise thing to do is to make sure that China rises peacefully and in a way that is beneficial to the rest of the world. China is making efforts to allay the fears of those that argue that China is a threat, while striving to expand its cultural charm and so-called soft power. In line with the so-called “China Fever” that is gripping the world, China has established some 210 Confucius Institutes throughout the world to raise the profile of Chinese language and culture. Once China successfully hosts the Beijing Olympics, it will be able to exhibit its collective power as the world watches in awe. China is expected to feature culture and humanity in its Olympics to parade China’s culture to the rest of the world, instill pride in the minds of its people, and turn the event into an opportunity for strengthening national unity. China deserves to drink champagne with the hosting of the Olympics, and I truly hope that Beijing Olympics turns out to be a huge success. The process toward the rejuvenation of China has already begun, but how long will China be able to sustain this success? China is indeed massive and its rate of progress astonishing, but the challenges that China faces are also staggering. How China addresses those challenges will shape China’s future.

4. China’s challenges

A top financial institution once used the analogy of Icarus to describe the precarious nature of China’s economy. Icarus is a Greek mythological character with wings that are attached with wax. Icarus tries to get closer to the Sun, but the closer he gets to the Sun, the closer his doom since the wax melts and the wings fall off. This analogy of contradiction alludes that China is dangerously flying at high altitude. Even now, many are uneasy about a possible hard landing of the Chinese economy. In fact, even the Chinese government does not deny that the high-speed economic development is generating many problems. Excessive focus on quantitative growth has resulted in environmental pollution, ecological degradation, and serious waste of resources. The increasing imbalance in development between regions and urban and rural areas and different income groups are becoming potential factors for social unrest. The most recent warning signal was the uncomfortably high Gini’s Coefficient, a measurement often used to gauge social inequality. China is also faced with the triple woes relating to agriculture: farming, farms, and farmers, which account for the lion’s share of Chinese population. In addition, corruption is also a source of severe headaches. Lately, rising prices and property values have added to fears of a bursting of the bubble. Continuing huge trade surpluses and growing foreign reserves are generating frictions abroad. One scholar recently demonstrated with the results of a survey that the integrity of the Chinese regime depended more on ‘steady and balanced growth’ rather than on ‘democratic reform’. Not completely oblivious to that, the Chinese leadership is taking action. Labeling past quantitative development that were detrimental to the environment and resources and created severe income gaps as unscientific model, the leadership has presented the new so-called “scientific development model” which focuses on environmentally-friendly growth and high-efficiency for sustainable growth. The scientific development model was already endorsed at the 17th National Congress in October last year. Under the banners of scientific development and harmonious society, China is pursuing diverse policy transformations. Indiscriminate investments have become more discerning and selective with focus on sophisticated technology and environmentally-friendly projects. China is also strengthening its competitiveness by upgrading industrial structure, updating its science and technology, moving away from an export-oriented economy to one that stimulates domestic consumption, strengthening environmental regulations, and introducing the Go Outward strategy (走出去) to promote overseas Chinese investments. China is engaging in strategic economic dialogue with its major partners to address trade imbalances, while seeking to resolve issues at China’s pace through controlled and gradual appreciation of the Renminbi. Through the Olympics, China strives to promote the birth of a Global Corporate China. The question is: Will such efforts steer China in the direction of macro economic stability, sustained growth, and rectifying the imbalances in global economy?

I would like to conclude the first part of my talk by forecasting the future of China’s economy in the short term and in the long term.

5. China’s economic prospects

As mentioned earlier, this year will be a very significant year for China in many respects. I personally feel that 2008 will be the year in which China will be tested on whether or not it is ready to join the ranks of global economic superpowers. Such view is not unrelated to China economy pessimists who argue that, in the short term, 2008 will be one in which China’s bubble begins to burst or the economy begins to recede. The issues that loom the largest are inflationary pressures, bubbles in the stock market and real estate market, appreciation of the Renminbi, and trade imbalance. I have read the opinions of some of the economic experts regarding those issues. If I were to give you my informed view, basically I feel that in the end, China’s economy will find stability in the midst of turbulence. Indeed, inflationary pressures grew since the second half of last year, but those pressures are in large part due to food prices. Prices in the services and manufacturing sectors have not shown upward pressures. At the same time, as Beijing is very determined to stave off inflationary pressures, I believe that inflation will be brought under control. However, China does need to pay close attention to possible difficulties in preventing rise in costs due to increase in wages and oil prices. In the stock market and the real estate market, we are clearly seeing signs of overheating. However, my outlook is that such overheating will not boil over to the level of social unrest; instead, the upward trend will be slowed through several periods of adjustment. The Renminbi is expected to continue to appreciate. But again, the Chinese government that places economic stability first and foremost will ensure a well-controlled, gradual appreciation, although the pace of appreciation is expected to pick up. Regarding trade imbalance, China is likely to choose the method of high-level talks with its major trading partners, the US, the EU and so forth.

Turning to China’s underlying short-term policy principles, I believe that China will continue to pursue high-rate growth with a view to creating jobs, securing social stability, and promoting balanced development of backward regions. During the 17th National Congress last year, President Hu declared Sound and Rapid Development (又好又快) as the guiding economic principle. That clearly demonstrates that the Chinese leadership is still stressing high growth as much as high efficiency. That is how I believe China will deal with its short-term challenges. The Olympics should provide further impetus to globalization of Chinese enterprises and Chinese investments overseas. Those will become new locomotives of China’s economy.

Now let us look at some of the long-term issues. China is a massive economy, and for such a giant to sustain its growth in the mid-to-long term, China will be compelled to introduce significant changes in legislation, policies regarding resources and environment, and its economic growth model. Increasing pressure on resources, growing environmental pollution, and shrinking arable lands constitute some of the major impediments to sustainable development, requiring urgent solutions. On top of that, other stumbling blocks include education and population: aging population and shrinking workforce, unstable social welfare system, and lack of investment in education. China needs to devise mid-to-long-term measures to combat those issues. Indeed, changing the economic development model and securing new sources of growth will be no easy task. China has come to a difficult point at which it needs to sustain growth on the one hand and address the conflicts stemming from growth on the other hand. In the long-term, however, I am optimistic that China will find solutions to their problems. Immediately following the 17th National Congress, a Korean scholar wrote a commentary titled, “The Secret of Chinese Communist Party’s Long-term Rule,” which painted a rather optimistic picture of China’s future. So what is the secret? It is the Communist Party’s ability to transform and reinvent itself. Over the decades, the Communist Party has been very adept at identifying the change of trends and adapting to those changes by transforming itself. I fully agree with that view. It is clear that the 70 million or so that make up the Communist Party are the actual forces behind China. The Communist Party is not a party of workers and farmers anymore. It represents all walks of life. On the one hand, they are calling for democracy within the party, while on the other hand, they are also trying to communicate and interact with the pluralistic society by calling for democracy throughout the country. I truly hope that China will succeed in such efforts. If a rising China were to suddenly freefall like Icarus, it would be a tremendous disaster to Korea. At this point, Korea’s future is evidently intertwined with China. Having said that, let me move on to Korea-China relations.

The Present and Future of Korea-China Relations

1. Background

For people in Hong Kong, the year 2007 was a year in which Hong Kong celebrated the 10th anniversary of its return to China. In terms of Korea-China relations, however, it was more than that. It was also a year that marked the 15th anniversary of Korea-China diplomatic ties. However, Korea-China relations actually go much farther back. For over 2,000 years, the two countries have developed close ties with mutual exchange and influences. It was only in recent history that Korea and China chose separate paths—socialism and capitalism—and were further drawn apart for approximately 40 years due to the Cold War following the Korean War. When the Cold War ended, the two nations set out to restore their ties with the normalization of relations on 24 August 1992. During the following 15 years, Korea and China improved their ties to the envy of the rest of the world. What made it possible? The biggest contributor is China’s high-rate economic growth. However, it would be a mistake to say that Korea and China only have economic interests in each other. The backbone of their close friendship is the many similarities exclusively shared between them. Let us examine the current status of their relations, the factors that help to improve their relations, and their challenges and prospects in the 21st century.

2. Current relations after 15 years of diplomatic ties
A. Economy and trade

The pace of improvement in Korea-China relations in just 15 years is amazing, but the scope of development is even more striking. Improvements were made in political, social, and cultural aspects, as well as in bilateral traffic and exchanges. The most notable improvement is clearly in economy and trade. With the two economies being mutually complementary, Korea and China were able to pursue mutually beneficial economic growth. Bilateral trade volume jumped from a mere 5 billion Dollars to 150 billion Dollars in 2007. Presently, China is Korea’s #1 trading partner and China, Korea’s #1 destination for exports. To China, Korea is its fourth trading partner after US, Japan and Hong Kong. Korea’s trade volume with China is becoming as large as that of Korea-US and Korea-Japan put together. In fact, 160 billion is four times the volume of China’s trade with Russia. Korea and China are now aiming for a trade volume of 200 billion Dollars by 2012, and they are well on their way already. In investment, China is again Korea’s #1 destination, and Korea’s total investment since 1992 amounted to a total of 38 billion Dollars.

B. Bilateral travel and exchanges

Traveling between the two nations also grew just as impressively as economic exchange. In the early 1980’s, there were a mere 40,000 travelers between the two nations. Now, the number has jumped to 5 million. In fact, China has become the most traveled to destination from Korea. Among foreign visitors in China, Koreans have replaced the Japanese as #1, while the 57,000 Korean students, accounting for 40% of the foreign students in China, far outnumber any other group of foreign students. The second largest student group is Japanese at 18,000, followed by US at 12,000. Long-term residents also amount to 700,000, making Korean residents clearly the biggest foreign community in China. To keep abreast of such growth, each week, 830 flights operate between 6 Korean cities and 31 Chinese cities. On a daily basis, some 120 planes are servicing 12,000 Koreans to various destinations in China.

C. Politics and foreign affairs

To support such remarkable growth in economic cooperation and exchanges, Korea has set up seven consulates throughout China in addition to the Korean Embassy in Beijing. They are in Shanghai, Qingdao, Shenyang, Chengdu, Xian, Guangzhou and Hong Kong. Korea is the only country to have as many as seven consulates in China. High-level exchanges are also active between Seoul and Beijing. Since normalization of ties in 1992, all presidents of Korea have visited China. Likewise, visits by all Chinese presidents and premiers since 1992 have contributed to further solidifying bilateral ties. Apart from the bilateral exchanges, the leadership of Seoul and Beijing also meet in intra-regional and international meetings, where they often closely consult each other on issues of common concern. Hence, both at home and abroad, the presidents and prime ministers of the two nations meet very often. Consultations at the ministerial level are even more regular. The steady improvement in bilateral relations culminated in 2003 during President Roh Moo Hyun’s visit to Beijing, where the two nations agreed on a “comprehensive cooperative partnership.” What does that mean? It means full cooperation in all areas, including economy, politics, society, culture and what not. Lately, Seoul and Beijing have been closely cooperating with regard to the North Korean nuclear issue.

3. Engine behind rapidly expanding bilateral relations

Many people find hard to believe the pace at which Korea-China relations have grown. I believe there are five major reasons for that. First, their economies are mutually complementary. Korea is a rare case of a country that went from complete ruins in the aftermath of war to joining the ranks of advanced nations in just half of a century. Such compressed national growth serves as a rare and valuable reference for China. At the same time, Korea’s capital and sophisticated technology, combined with China’s abundant labor and immense market, creates a remarkable synergy for economic development in both countries. Second, Korea and China are geographically very close. Shandong Province is so close to Korea that there is a saying that goes: When the rooster in Shandong croaks at dawn, you can hear it in Korea. Many are envious that the growth energy and momentum along China’s eastern coast are being transferred to Korea. That is also attributable to the geographical proximity. In October 2006, President Roh embarked on a single day trip to China, and it would be safe to say that Korea is probably the only country that is able to do that. Third, the two nations have historic ties. As I mentioned earlier, Korea-China exchanges go back more than 2,000 years. Therefore, it would be a mistake to examine only the past 15 years of bilateral ties. Fourth, Korea and China share cultural similarities. Apart from Taiwan, Hong Kong and other overseas ethnic Chinese, Korea and Japan are the only countries that use Chinese characters. For Korea, however, in addition to the Chinese characters, they were also influenced by Confucianism, Chinese ancient literature, and Chinese medicines, which the Koreans have further developed in their own unique ways. One of my favorite books is Sanguoyanyi (Three Kingdoms), and sharing those stories with any Chinese is a sure way to become good friends with him/her. More than 100 million Chinese are avid fans of Korean TV drama series. Why? Because they are able to recognize in those series elements of Chinese tradition that are either lost or forgotten. Korean culture, as reflected in Hanliu, is a creative combination of ancient cultures that Korea and China share and western culture that Korea adopted and transformed in the process of modernization. Fifth, “strategic consensus.” Korea and China share common interests in peace, stability, and common prosperity on the Korean peninsula. For China’s steady economic growth, it is imperative that the situation on the Korean peninsula and Northeast Asia stays stable. That is why China supports a nuclear-free Korean peninsula and hopes that stability will be maintained in the process leading to progress in inter-Korean relations. For Korea, peace and stability has a direct bearing on the survival of Korea; hence, China’s support is crucial. What is even more imperative is that China provides cooperation with more imminent issues, such as denuclearization of the Korean peninsula, inducing North Korea to reform and openness, and eventual re-unification of the two Koreas.

4. Korea and China in the 21st century: challenges and outlook

The five points that I just outlined helped to bring Korea and China together into a comprehensive cooperative partnership, and they will continue to serve as the backbones of future bilateral ties. However, the expanding bilateral exchanges are not without certain disagreements along the way. Some of them concern history, culture, trade and treatment of North Korean defectors. But then again, they may not be entirely unexpected. When you have 2,000-plus years of exchange, a trade volume reaching 160 billion Dollars, and 5 million people coming and going every year, it may be strange not to run into issues. In other words, as exchanges grow between two close neighbors, there are bound to be issues on which they do not see eye to eye. For instance, some Koreans display concerns about the Chinese nationalistic pride that is growing in tandem with the size of their economy. Also, some are uneasy about Korea’s high level of dependency on Chinese economy and are apprehensive about the risks of a change in the Chinese growth model. However, in the long-term, I believe the big picture is that mutually beneficial and complementary factors far outweigh the conflicting and challenging factors. Hence, I believe that Korea and China can continue to strengthen their ties for a long time. It is, of course, important to seek a new cooperation strategy in line with the rise of China and constantly changing world. Again, the rise of China in the 21st century is a reality that the entire world has to face, and the plausible way for small-to-mid-sized nations, such as Korea, to survive and prosper under such circumstances is to minimize the risks that the rise of China brings, while actively capitalizing on new opportunities. The current developments that work positively toward bilateral ties will continue to work in favor of the two nations in the future. The vision and role of the leadership cannot be overemphasized in this process. This year, both Korea and China are, respectively, ushering in new leadership that will lead their respective countries for the next 5 years. What is the next step in Korea-China relations? Based on the trust built thus far, the incoming governments need to engage in “strategic dialogue,” and discuss matters of substance in an open and honest manner. It is crucial that the new leaderships look beyond the pending agendas during their terms in office. They need to have a long-term vision of 20 to 30 years down the road in promoting Korea-China relations.

Source: Consulate General of the Republic of Korea in Hong Kong