Emerging Markets, Stocks

South Korea And China Sign Free-Trade Agreement: Will It Help To Avoid Growth Contraction?

South Korea and China signed a free-trade deal on Monday that will remove tariffs on more than 90 percent of goods over two decades,” Business Mirror reports.

South Korea China Map

The agreement covers 22 areas, including finance and online commerce. However, rice and autos have been excluded from the document.

The deal should boost South Korea’s GDP by 1 percentage point and add more than 50,000 jobs within the next ten years.

The agreement offers mutual interests. It will give South Korea’s small- and medium-sized companies easier access to the Chinese market. On the other hand it will boost China’s investment in South Korea.

The signing of the agreement came as China’s factory activity remained subdued last month with both export demand and employment contracting, according to an official survey on Monday that adds pressure on Beijing for more economic stimulus,” Business Mirror noted.

The official China PMI edged up to 50.2 from April’s 50.1 in line with analysts’ forecast for a 50.2 reading.

With China’s manufacturing sector presenting a mixed picture in May, analysts are betting on even more stimulus from Beijing to spur momentum in the world’s second largest economy,” Seeking Alpha noted yesterday.

Report23.co.uk reported the following:

South Korea’s manufacturing activity contracted for a third consecutive month in May and fell to its lowest level since mid-2013, a private survey showed on Monday, casting further shadows on the country’s economic recovery.

The HSBC/Markit purchasing managers’ index (PMI) of South Korea’s manufacturing sector slid to a seasonally adjusted 47.8 in May from 48.8 in April, Markit Economics said in a statement.

The May reading was the lowest since the index stood at 47.5 in August 2013.

The current slowdown in South Korea’s economy could devolve into a protracted bout of deflation, the IMF warned in late May, urging the central bank to cut rates, Reuters noted.

About ETFalpha

Chief ETF Strategist & Co-Founder at EMerging Equity


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