A free trade deal between South Korea and China is expected to have no meaningful impact on big South Korean companies in the near- and medium-term, Moody’s Investors Service said Thursday, citing a slow pace of tariff eliminations and a narrow scope of affected goods.
South Korea and China jointly announced earlier this week that they had effectively reached the free trade agreement (FTA) that will remove tariffs on about 90 percent of goods traded between the two nations over the next two decades. However, rice and autos were excluded from the deal.
The free trade agreement between South Korea and China “will have no meaningful near- to medium-term impact on rated Korean corporates. This is because a large proportion of China’s custom duties will either remain in place or gradually phase out over the next 10-20 years under the proposed agreement,” the U.S.-based global risk evaluator said in a statement.
“Although China is by far the largest export market for many Korean exporters, the FTA will not have any meaningful impact on rated Korean corporates’ credit profile over at least the next 3-5 years,” Moody’s said.
For South Korean carmakers such as Hyundai Motor Co. and its affiliate Kia Motors Corp., Moody’s said the deal will have no impact on their credit ratings.
“The impact of the FTA will be largely neutral to Korean automakers, such as Hyundai Motor Company and Kia Motors Corp., because custom duties will remain largely unchanged and because these companies have already established significant production bases in China,” it said.
Two-way trade between South Korea and China totaled US$228.9 billion in 2013. (Yonhap)
