China Focus: China's FTAs with ROK, Australia take effect

China's free trade agreements (FTAs) with the Republic of Korea (ROK) and Australia took effect Sunday, saving billions in tariffs for companies from the countries.

ROK cargo ship "Morning Sea," carrying 2,600 tonnes of liquid sulfur, unloaded at a bonded port in the east China city of Qingdao Sunday morning. The goods were the first ROK exports to benefit from the zero tariff policy.

Chuangxin Chemical Trade (Shanghai) Co. Ltd., the importer, purchases 300,000 to 400,000 tonnes of sulfur a year from the ROK. Quan Yong, the company's general manager, said the tariff drop from 1 percent to zero would save the company 3 million (463,000 U.S. dollars) to 4 million yuan in tariffs a year.

"In addition to importing sulfur for fertilizer production, we also import asphalt and petroleum coke from the ROK. The tariff cut will promote trade greatly," he said.

Shandong Hongri Acron Chemical Joint Stock Co. Ltd., a Sino-Russian fertilizer firm, is one of Chuangxin's customers.

Chen Jihua, purchasing manager of the company, said the reduced cost on material imports would help bring down fertilizer prices, which would eventually benefit farmers.

A shipment of mini robots on Sunday became China's first exports to the ROK to enjoy FTA benefits, which cut tariffs on the item from 8 percent to zero.

Xu Lei, chair of the robot's maker, Qingdao Tongfeng Youdao Automation Co. Ltd., said they were the company's first exports of the product to the ROK. The price advantage will help it break into the ROK market.

Sunday marked the start of the first round of tariff cuts, and a second will follow on Jan. 1, 2016.

China and the ROK signed the FTA in June after three years of negotiations. Under the deal, Seoul and Beijing will eliminate tariffs on more than 90 percent of traded goods within 20 years.

The ROK expects the bilateral FTA to raise its real GDP by 0.96 percentage points, create 53,800 jobs and benefit consumers by 14.6 billion U.S. dollars.

Starting Jan.1, 2016, the zero tariff policy will cover 20 percent of China's exports to the ROK, mainly electronic devices, chemical products and minerals. Meanwhile, ROK goods to enjoy zero-tariff policies will cover 50 percent of the items it exports to China, mainly machinery, steel and iron wares and chemical goods.

Goods such as machinery, textiles and electronic devices, for which there is overlap between China and the ROK, may suffer an impact from the FTA, said Wu Xia, head of the Tariff Department of the Qingdao Customs.

However, competitive pressures will stimulate industrial upgrades in both countries, she said.

ROK-made skincare, cosmetics, clothing and food, which have become very popular among Chinese consumers, will still have to wait 10 to 20 years to see a gradual fall in tariffs.

Chinese customs forecast that one year from now, about 26 billion dollars in Chinese exports to the ROK and 20 billion dollars in ROK exports to China can expect tariff cuts under the FTA. In the same period, 20 billion dollars' worth of Chinese exports to Australia and 15 billion dollars of Australian imports will benefit from FTA tariff cuts. Endi