East Asian Money Hotline
According to the Bank of Korea, the three Northeast Asian countries of South Korea, China, and Japan are working on a regular meeting among their monetary policy committees so that information and data on the Chinese economy and its uncertainties can be better shared. It is likely that Korea and Japan will first restore their regular meetings before China takes part in it, as Chinese monetary policy committee members are rather limited in terms of independence.
“We need multifaceted dialog channels given the degree of today’s global economic uncertainties, and our talks with Japan have been well underway for quite a while,” a staff member at the Bank of Korea explained, adding, “We expect that the regular meeting beyond private get-togethers will add the sense of belonging, intimacy, and the like.”
This is the first time that the three countries have worked on regular talks among their respective monetary policy committees. At present, their central bank governors engage in a single three-way meeting a year. The purpose of the new regular conference is to better predict internal and external economic uncertainties by means of a two-track approach.
According to watchers, the central bank governors’ meeting entails few in-depth discussions in spite of its symbolic significance, and the Korean government is planning to focus on the current economic situations of China in the new conference.
Besides, Korean firms are still clinging to processing trade in their business with China, although the Chinese government has inhibited it for about 15 years. This is affecting the Korea-China FTA in terms of consumer market penetration. The Korean government remarked in Sept. last year that Korean industry needs to shift its focus from intermediary goods to consumer goods, but things have not changed much. According to the Bank of Korea, the ratio of processing trade to China’s overall trade dropped from 53.7 percent to 32.8 percent between 1998 and 2014. However, intermediary goods and consumer goods took up 73 percent and 7 percent of Korea’s exports to China as of the end of last year, respectively.