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Greater Asian integration
Publication Date : 04-05-2012
Though Asian economies as a whole have so far fared better than Europe and the United States, their need to build a regional firewall against a possible escalation of the global financial crisis is no less imperative.
So the joint announcement by China and South Korea on Wednesday that they will formally start negotiations on a free trade agreement this month is welcome.
South Korea expects the planned deal will increase its GDP growth by around 1 percentage point and create between 190,000 and 250,000 new jobs within five years after its implementation.
Given the huge size of the Chinese economy, the direct impact of the deal on China is understandably less predictable. But the bilateral trade volume that is set to reach US$300 billion by 2015 speaks volumes about the importance of such an agreement.
More importantly, amid rising protectionism and the fragile global recovery, the accord can serve as a much-needed starting point for Asian countries to further deepen economic cooperation and integration.
After seven years of preparation, the forthcoming negotiations between China and South Korea show that Asian policymakers are beginning to pay more attention to the long-term challenges posed by the ongoing global rebalancing and overall structural transformation.
The global crisis is a wake-up call for Asia, which for decades has largely built its economic success on the seemingly insatiable demand from European and US consumers.
To weather a renewed financial crisis and weakened export demand from developed markets, Asian economies must update their growth model to better tap the booming markets at home.
The potential of consumption growth in China, the world's second largest economy, has become more obvious as the country shifts steadily away from its dependence on exports and investment for growth.
The planned FTA between China and South Korea will set a good example of how closer economic integration helps advance bilateral and regional prosperity and stability.
It will also act as foundation and driving force for the proposed three-way China-Japan-South Korea FTA.
It is hoped that more such regional efforts to accelerate economic integration will build a real firewall in Asia against another global crisis.