China and South Korea have held a ministerial-level meeting to explore the possibility of closer economic cooperation, as analysts say the two Asian economic powerhouses have managed to rebalance economic ties.
China's top economic planner, the National Development and Reform Commission (NDRC), on Tuesday held its inaugural meeting on bilateral economic exchanges with members of South Korea's finance ministry in Changchun, Jilin province.
The Chinese side relayed its desire to "consolidate and enhance the resilience and cohesion of the industrial and supply chains between the two countries", according to an NDRC statement on its official WeChat account.
Confronted with US chip sanctions on China and the rapid ascent of China's car industry, South Korea is assessing the state of economic competition and identifying favourable opportunities for cooperation, according to analysts.
The NDRC said it raised hopes of fostering deeper collaboration with its neighbour in the realms of high-end manufacturing, the digital economy, and low-carbon initiatives.
The NDRC also pinned hopes on a broader revitalisation of the nation's northeast rust-belt region - a plan that President Xi Jinping updated this year to rejuvenate the old industrial region that is near South Korea and has faced economic challenges for years.
"We will hold the meeting annually to help South Korean firms better communicate with the Chinese government and address their difficulties in running a business in China," said an unidentified Korean ministry official quoted by the Yonhap News Agency.
Amid discussions on investment and business opportunities, Korea conveyed its dissatisfaction with China's export controls on crucial semiconductor manufacturing materials, including gallium, germanium and graphite, according to Yonhap.
The two East Asian countries compete and cooperate in the economic sphere, especially in the fields of automobiles, ships and chips, said Peng Peng, executive chairman of the Guangdong Society of Reform.
"The competition between these two countries in automotive and ship manufacturing is getting more intense," Peng said. "The Chinese market continues to [be less accepting of] South Korea's cars, and it is surpassing South Korea in ships [except for a few models], but South Korea still holds the upper hand in the chip sector."
Amid Sino-US tensions, China and South Korea have struggled to establish mutual political trust, which subsequently challenges their economic cooperation, Peng said.
"South Korea needs to balance the technology crackdown [by Washington on Beijing] with the smooth flow of supply chains," Peng added.
After signing its Chips and Science Act into law in August 2022, in a bid to enhance the country's competitiveness with China, the US last month eased export controls on South Korean companies Samsung Electronics and SK Hynix, allowing them to expand their semiconductor factories in China.
Ding Shuang, chief Greater China economist at Standard Chartered Bank, said the US' relaxation on controls for the South Korean firms "will deepen cooperation between the two countries". And he said the move could also help China meet its surging demand for chips.
"But South Korea will certainly attempt to maintain its technological advantages over China in the chip sector," Ding said.
Ding added that China and South Korea grapple with a contradictory model of economic cooperation, as South Korea strives to uphold its semiconductor dominance while also recognising the need to glean insight from China's experience in the electric car industry.
"Not only South Korean, but also German and Japanese car companies are managing to engage in the Chinese market," Ding said. "Otherwise they risk losing their global competitiveness."
South Korean cars have already lost considerable ground in the world's largest car market. Since seeing its China sales peak in 2016, South Korean carmaker Hyundai has witnessed a gradual decline in annual sales there.
Last year, Hyundai sold a mere 22 per cent of what was sold in China in 2016, even as 2022 was an otherwise banner year that saw the company become the world's third-largest carmaker by sales.