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| A view of Hong Kong's Kwai Tsing container terminal / gettyimagesbank |
Trade set to expand when Hong Kong joins RCEP
By Kim Bo-eun
HONG KONG ― The geopolitical situation in Asia continues to evolve, but Korea and Hong Kong remain important trading partners, data shows. Bilateral trade is set to get a further boost in the coming years when Hong Kong joins the Regional Comprehensive Economic Partnership (RCEP), the world's largest trade bloc, which Korea is also a member of.
In the first three month of this year, Hong Kong's exports to Korea totaled $2.38 billion, up 10.8 percent compared to the same period of 2021, figures released by Hong Kong's Census and Statistics Department on Thursday showed, although there was a small year-on-year fall of 1.1 percent in March.
Data from the Korea International Trade Association shows Hong Kong was Korea's seventh-largest trade partner as of 2021, with the value of exports and imports adding up to $39.71 billion. This figure was up 23 percent from $31.19 billion in 2020. Korea is Hong Kong's fifth-largest trade partner.
Hong Kong was the fourth-largest destination for Korean exports in 2021 after China, the U.S. and Vietnam. Korea mainly exports electronic components, petrochemicals, home appliances and transport machines to Hong Kong.
For Korea, Hong Kong is the key entry point for merchandise trade with China, and much of Korea's exports to Hong Kong are re-exported to mainland China. Hong Kong has played the role of a re-exporter due to the absence of custom tariffs and low corporate taxes.
Korea imports electronic parts, metallic minerals and marine products, among others, from Hong Kong.
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South Korea's consulate in Hong Kong was established in May 1949, as one of the first five diplomatic missions to be set up overseas since the establishment of Korea's post-colonial government. The bilateral Investment Promotion and Protection Agreement that went into effect in July 1997 is one of such agreements Hong Kong has made with 22 economies around the world.
In 2017, the Hong Kong Trade and Development Council's Korea office opened, in order to promote trade further.
Meanwhile, Hong Kong applied to join the RCEP in January, and China has backed its membership. China is the largest economy among the 15 members of RCEP, which centers on the Association of Southeast Asian Nations (ASEAN), but also include non-members. The trade bloc, which went into effect in January, makes tariff reductions and exemptions among member economies possible.
Hong Kong is set to be able to join in the latter half of 2023, at the earliest, due to the fact that the trade bloc opens to members only 18 months after going into effect.
"When Hong Kong joins RCEP, it is expected that it will be able to boost not only trade in products with Korea, but also contribute to strengthening exchanges and cooperation in logistics, finance and intellectual property, as well as supply chains," Ivy Szeto, a market research analyst at Korea Trade-Investment Promotion Agency in Hong Kong, said.
"It is expected that there will also be great positive effects in economic relations with Korea," Szeto added.
At the same time, Hong Kong is also expected to continue its role as a global financial hub, despite recent troubling developments that have made the city less attractive for foreign businesses.
Concerns about Hong Kong have grown in recent years, as the China-backed national security law, which reduces the autonomy of the city as it limits certain freedoms previously protected under Hong Kong's Basic Law, was introduced in 2020. Relatedly, Hong Kong has also seen an exodus of businesses amid the COVID-19 pandemic, as the city enforced strict measures including flight bans, tight management of the border and several weeks of mandatory quarantine upon arrival.
But Hong Kong's government has begun taking measures to relax COVID-19-related restrictions in April, after foreign companies requested that they be eased.
"Despite the surge in COVID cases in Hong Kong in the past months, Hong Kong has not taken extreme measures such as a lockdown, which goes to show it is still different from mainland China," an official of a foreign consulate general in Hong Kong said. "The differing responses of the governments of Singapore, Hong Kong and China show the degree of attractiveness of each as environments for businesses to operate."
Shanghai has been under a lockdown for weeks since late March, under China's zero-COVID strategy, which has frustrated businesses there.
Foreign businesses are mostly expected to maintain their operations in Hong Kong due to its proximity to China and the role it plays as a destination for companies to raise capital.
Hong Kong is Korea's third-largest investment destination, after the U.S. and China as of the end of 2020, with investments in trade, finance and the professional service industry, according to data from the Consulate General of South Korea in Hong Kong.
About 140 Korean businesses operate in Hong Kong, including 10 banks, according to data from the same source.
