This year marks the 15th anniversary of the establishment of diplomatic relations between China and the Republic of Korea (ROK), or South Korea, and it is also a year of friendly communication between the two countries. Various activities, especially Chinese Premier Wen Jiabao's successful visit to South Korea, have greatly promoted the development of bilateral relations, which means Sino-ROK trade and economic ties will step onto a new stage.

In 2005, the bilateral trade volume between the two countries first broke the $100 billion benchmark and reached $134.3 billion in 2006. It is expected that the trade volume will total about $150 billion this year and $200 billion in 2010.

South Korea is China's third biggest trade partner, just after the United States and Japan. China has been South Korea's biggest trade partner for three consecutive years. Besides, China is also the biggest importer of South Korea products. Since 2002, China has been South Korea's top investment destination. Currently, the two countries are studying establishing a free trade area (FTA). After the FTA is established, bilateral relations will be further deepened.

Sino-ROK trade and economic relations have several characteristics:

First, the increase in trade is remarkable. Since 2001, bilateral trade and economic development has maintained an annual growth rate of 26.2 percent, which is higher than China's annual growth rate of foreign trade, which stands at 24.9 percent, and South Korea's annual foreign trade growth rate of 11 percent.

In 2006, the Sino-ROK trade volume was $134.3 billion. When the two countries established diplomatic relations in 1992, their bilateral trade volume was only $5 billion.

The first reason for the outstanding growth is the rapid and continuous economic growth of both countries. China's annual growth rate in recent years has been 9.7 percent, while South Korea's has been 4.6 percent. The rapid economic growth in the two countries has not only created an abundant material basis for their exports, but also enlarged their market spaces.

The second reason is the strengthened communication between the two countries, including their leaders' frequent reciprocal visits, and the comprehensive development of bilateral relations. South Korea's acknowledgment of China's market economy status provides the necessary atmosphere for trade and economic development of the two countries.

The third factor is that South Korea's commodities are more competitive than those of other countries. Many high-tech commodities from South Korea are more suitable to the Chinese market, particularly in terms of price. Chinese consumers are also satisfied with the after-sale service.

The fourth reason is that the Chinese market is more open to foreign trade development since the country joined the World Trade Organization (WTO) in 2001.

The fifth factor is that the rapid growth of South Korean enterprises' direct investment in China has promoted a rapid increase in South Korea's exports of products and related spare parts to China.

Meanwhile, ROK products made in China are sold back in the South Korean market, enhancing China's trade with South Korea on some level. According to China Customs Statistics Yearbook, the annual growth rate of China's import volume from South Korea has been 26.6 percent in the last six years. South Korean statistics show that China has been South Korea's biggest exporter since 2004, surpassing the United States.

Second, China's major export products have increased on a large scale. In recent years, mechanical, electrical, video and audio equipment, base metals and related products, textile materials and products, mineral products, vegetal products and chemical products have been China's major export products to South Korea.

In 2006, China exported base metals and products to South Korea valued at $9.72 billion, increasing 47.9 percent from a year earlier. Mechanical, electrical, video and audio equipment and products exported to the ROK remained the biggest export category, valued at $14.63 billion, increasing 25 percent from the previous year. Meanwhile, textile materials and products exports increased 27.3 percent in 2006 comparing with the previous year. The above-mentioned export categories are the main elements that accounted for an increase in China's exports to South Korea.