President Lee Jae Myung's special delegation led by former parliament speaker Park Byeong-seug conveyed his personal letter on the future course of South Korea–China relations to Chinese leader Xi Jinping, along with an invitation to visit South Korea during the upcoming APEC summit, Seoul's Foreign Ministry said August 25, 2025. The letter was handed over during the delegation's meeting with Chinese Foreign Minister Wang Yi on August 24, which was followed by a banquet at the Diaoyutai State Guesthouse in Beijing.(PHOTO: MOFA)
President Lee Jae Myung’s special delegation led by former parliament speaker Park Byeong-seug conveyed his personal letter on the future course of South Korea–China relations to Chinese leader Xi Jinping, along with an invitation to visit South Korea during the upcoming APEC summit, Seoul’s Foreign Ministry said August 25, 2025.
The letter was handed over during the delegation’s meeting with Chinese Foreign Minister Wang Yi on August 24, which was followed by a banquet at the Diaoyutai State Guesthouse in Beijing.
Chinese Foreign Minister Wang Yi said that, South Korea hopes to normalize relations with China that have been strained in recent years, and agreed to boost economic cooperation.
Korea–China relations in the second half of the 2020s are especially delicate, since South Korea is trying to balance its security dependence on the U.S. with its economic dependence on China.
President Lee sent envoys to Beijing to’normalize relations’ and invited Xi Jinping to the APEC Summit in Gyeongju (Oct. 2025). This signals a desire for detente after years of friction over THAAD (2016), U.S.–China rivalry, and supply chain decoupling.
Forecasting the relations between two countries, it will improve cautiously, but remain vulnerable to external shocks, e.g., U.S.–China confrontation, Taiwan crisis, or North Korea instability.
China is still South Korea’s largest trading partner, but dependence is declining as Korean firms diversify to the U.S., India, and ASEAN. The trade volume between South Korea and China reached USD 267.6 billion in 2024, marking a 17.7% increase from USD 227.4 billion recorded in 2015.
In 2024, over 51% of South Korean semiconductor exports (including chips, equipment, and materials) went to China and Hong Kong. Though dependence is significant, it’s driven by Chinese industry demand—not geopolitical leverage.
Exports to the U.S. have increasingly challenged China’s dominance. By 2023, the share of exports to the U.S. rose to 18.3%, while those to China fell to 19.7%, reflecting deliberate strategic diversification.
Last year, Chinese Premier Li Qiang vowed a ‘new start’ in a trilateral summit with South Korean and Japanese leaders in May, where they reached a general consensus on future cooperation in various areas. While this ‘refresh’ could be a positive sign for South Korea and China to improve their economic ties, evolving bilateral dynamics, intensifying geopolitical tension, an uncertain Chinese economy, and a more competitive relationship in the global value chain pose serious challenges for two countries’ economic relations.
China’s economy lost steam in July, with retail sales rising just 3.7% year-on-year, well below the 5.9% growth expected. Industrial output grew 5.7%, its weakest pace since November 2024. New home prices fell 2.8% in July from a year earlier, extending a two-year stagnation, while fixed-asset investment rose just 1.6% in the first seven months of 2025, missing forecasts for 2.7%.
Meanwhile, analysts held on to their bearish outlook for the South Korean won, unchanged since early May, while slightly trimming short positions on the Singapore dollar, a Reuters fortnightly poll of 11 respondents showed.
Sentiment toward the Indonesian rupiah turned negative after flipping bullish, while short positions on the Taiwan dollar were trimmed.
Bank Indonesia unexpectedly cut its benchmark 7-day reverse repurchase rate by 25 basis points. The poll responses were received before the rate decision.
For the Indian rupee and Malaysian ringgit analysts pared back bullish positions. Philippine peso bearish bets were trimmed slightly, and Thai baht analysts trimmed bullish positions.
China is considering allowing yuan-backed stablecoins for the first time to boost wider adoption globally. It discussed expanding yuan use and possibly stablecoins for cross-border trade at the Shanghai Cooperation Organization Summit held on August 31 to September 1 in Tianjin.
“We have had quite a strong sell-off in the USD for much of 1H 2025 and currencies now await macro cues from data. With both of Fed’s inflation and employment mandate in a potential conflict, we could be in a period of consolidation,” said Fiona Lim, senior forex strategist at Maybank Singapore. “Currencies such as KRW and TWD which gained the most in 1H of 2025 have the biggest room to retrace.”
Investors fretted about Federal Reserve independence after another attack from President Donald Trump ahead of remarks from Chair Jerome Powell at the annual Jackson Hole symposium later this week.
The Asian currency positioning poll is focused on what analysts and fund managers believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and the Thai baht.
The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3. A score of plus 3 indicates the market is significantly long U.S. dollars.
To counter these pressures, Premier Li Qiang has committed to bolstering domestic consumption, supporting the housing market, and stabilizing employment, aiming to meet a ~5% growth target
Forecasts by the World Bank and others expect growth of 4–4.5% in 2025
Two countries reopened diplomatic and economic dialogue. South Korea recently dispatched a special envoy to Beijing to restore diplomatic ties and promote economic and supply chain cooperation, with an eye toward inviting Xi Jinping to APEC 2025 in Gyeongju. Both talked reopening FTA expansion, Building on the existing 2015 Korea–China Free Trade Agreement, officials from both sides are negotiating to include more sectors—like services and investment—to deepen economic integration
Alongside China and Japan, South Korea also supports strengthening the Regional Comprehensive Economic Partnership (RCEP) framework and possibly advancing a trilateral FTA to insulate regional trade against U.S. protectionism. RCEP negotiations began in earnest in 2013 and the agreement went into effect in 2021. The three nations continued to negotiate an additional, more comprehensive agreement. A trilateral investment has been signed by all 3 nations.
Talks stalled after the second 2019 summit, but resumed in 2024 with the first China–Japan–South Korea trilateral summit in over 4 years. Talks after 2019 have been mired by weak public interest in Japan and South Korea and increased geopolitical tension between China and the other two potential members. Additionally the implementation of RCEP has made the creation of a new trade agreement less pressing.
In March 2025, industry, trade and commerce officials from the three nations met to discuss enhanced trade in the face of US President Donald Trump’s tariff threats. The South Korean Trade Minister Ahn Duk-geun said at the summit “it is necessary to strengthen the implementation of RCEP, in which all three countries have participated, and to create a framework for expanding trade cooperation among the three countries through Korea-China-Japan FTA negotiations.”
The growing U.S.–China eco-nomic competition has pushed Seoul to increasingly integrate economic strategy with national security, balancing its alliance with health with economic engagement with China.
The Korea–China economic relationship sits at a complex juncture—deeply interwoven through trade and investment, yet stressed by geopolitical imperatives and economic slowdowns. South Korea is actively trying to recalibrate the partnership: preserving its economic interdependence while reducing strategic vulnerabilities via export diversification, trade diplomacy, and aligning economic policymaking with security considerations.
Beijing strongly opposes Korea’s participation in U.S.-led regional missile defense, high-tech restrictions, or expanded trilateral cooperation with the U.S. and Japan.
The trilateral meeting between the U.S., South Korea, and Japan can be traced to the meeting in November 1994 between then-President Clinton and his counterparts, Prime Minister Tomiichi Murayama and President Kim Young-sam. The meeting took place after the signing of the Agreed Framework(AF) in October 1994 on the sidelines of the Asia-Pacific Economic Cooperation (APEC) Summit. The press briefing released after the meeting emphasised closer cooperation between the three countries, stating, “There was also a clear consensus that we need to continue to consult and cooperate closely as we proceed with implementation of the Agreed Framework agreement.” President Kim Young-sam emphasised that “cooperation among our three countries is needed to support the idea that North Korea will faithfully implement the agreement.”
Under the Agreed Framework, the objective was to establish the Korean Peninsula Energy Development Organization(KEDO), which man-dated it “to deliver interim energy until the first Light Water Reactor was completed.” Following the APEC meeting, senior bureaucrats facilitated bilateral cooperation between the three countries, which would later be formulated as an innovative framework. In 1999, under President Clinton, a Trilateral Coordination and Oversight Group was set up to facilitate cooperation on the AF. Its mandate was “to ensure closer coordination of policy toward North Korea with U.S.’s two principal allies in Japan and South Korea.”
China remains Pyongyang’s lifeline. Seoul may push Beijing to restrain North Korea’s provocations, but Beijing will prioritize regime survival over Seoul’s security.
The Korea–China economic re-lationship sits at a complex juncture—deeply interwoven through trade and investment, yet stressed by geopolitical imperatives and economic slowdowns.
South Korea is actively trying to recalibrate the partnership: preserving its economic interdependence while reducing strategic vulnerabilities via export diversification, trade diplomacy, and aligning economic policymaking with security consider-ations.★
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