KITA News
  • Need to Lower Entry Barriers through Follow-up Korea-China FTA Talks on Service & Investment
    2019-03-04

    Need to Lower Entry Barriers through Follow-up Korea-China FTA Talks on Service & Investment


     

    - KITA points out Chinas regulatory barriers in service industries the second highest following India -


     

    It has been pointed out that in order to expand Korean companies' expansion into China's service industry, extensive market opening must be agreed in the follow-up Korea-China free trade agreement (FTA) negotiations on services and investment.


     

      According to a report titled Promising Sectors and Export Strategies in the Chinese Service Market issued by the Institute for International Trade (President, Shin Seung-kwan) of the Korea International Trade Association on February 19th, China has the second highest barriers to entry of foreign capital in service sector, following India, among the 42 major countries in the Organization for Economic Cooperation and Development (OECD) with regulations on joint venture with local companies, inadequate legal protections on intellectual property rights, etc., and restrictions on licensing and screening overseas contents.


     

      In the case of medical service and healthcare, it is difficult to enter into China as a single business. It is only possible when entering into the market in a form of joint venture through a partnership with a Chinese company. Although seven cities in China allow establishing hospitals with a single investment of foreign capital, it is impossible for Korean companies to enter independently into medical service area due to certification and authorization issues. 


     

      When it comes to the e-learning, since online education is relatively new in China, regulations on foreign investment or foreign companies joint venture with Chinese enterprises are insufficient. In addition, upon the implementation of the China Electronic Commerce Law this year, China began to regulate the service activities through the Internet in earnest.


     

      In particular, the entry barriers of Chinas cultural content sector for Korean companies are extremely high as China has a low level of openness to the outside world and obstructs the inflow of foreign content. China is pushing forward its own cultural content promotion policy while strengthening regulations on foreign content for its industrial protection as well as system stability. As a result, Korean companies are adopting indirect entry strategies such as changing production methods and distribution channels or relying on Chinese distributors. However, they are still having difficulties to secure stable export base. Recently, the number of unauthorized use of the formats of Korean shows that are popular in China has been rapidly increasing, but the problem is that there is not enough proper legal protections.

     

     

      In the tourism area, China still remains limitations on tourism in Korea since the sanction of THAAD (high-altitude missile defense system). In addition, the limited legal protections are the obstacles for Korean companies to make inroads into the design sector in china. Shim Hye-jung, a researcher at the Institute for International Trade, said, "Although the world is eyeing on the Chinese service market, it is not easy for foreign companies to enter into the market because of its high regulation barriers." The researcher stressed, "Since the Korea-China FTA talks and investment follow-up negotiations that started last year is aiming to conclude by the end of this year, we must work hard to make China agree on broader openings, including negative list approach and most-favored-nation treatment."


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