OREANDA-NEWS. November 17, 2014. China has been the biggest trading partner of South Korea and Taiwan for some years, but now investment is expanding and its citizens are flocking to visit Seoul and Taipei. There is more to come too: Korea and Taiwan are keen to increase the role that China’s currency, the renminbi, plays in trade and investment.

World Trade Organization membership has been a major catalyst. Korea joined in 1995, China in 2001 and Taiwan the following year. China became Korea’s largest export market in 2003. Taiwan’s merchandise exports to China have grown by an average of 45 per cent a year since 1998, making China its largest export market by far. Taiwan is also China’s main source of imports, especially for machinery and electrical equipment. The growth should continue, thanks to trade agreements with China.

China has long been an important destination for Taiwan’s foreign direct investment. And although flows have started to fall, business in the other direction is picking up fast. A similar pattern emerges in Korea: China is the second-largest destination for Korean investment even if China has so far invested very little in Korea.

Tourism has boomed. Chinese visits to Taiwan have soared since regular direct flights resumed in 2009, despite Taiwan’s government restricting Chinese tour groups to 5,000 people a day and just 4,000 a day for individual tourists. Only 3 per cent of China’s overseas visitors went there in 2013 while 41 per cent went to Hong Kong.

Korea has become an alternative destination, with China overtaking Japan in 2013 as the largest source of visitors. In 2013, Korea’s tourism revenue reached a record USD14.1 billion, with China’s 12 million tourists accounting for USD7.5 billion.

The internationalisation of the renminbi provides another fast-growing business opportunity. Taiwanese banks have been permitted to conduct renminbi-denominated transactions since 2013. Renminbi deposits have grown rapidly and should mean increasing demand for products such as debt denominated in the Chinese currency.

However, Korea’s financial infrastructure needs to be sufficiently developed for it to take the final step to becoming a mature offshore-renminbi hub and the experience of Hong Kong shows this may require several years. Hong Kong launched renminbi-financing activities in 2004 but they picked up only when regulations were eased in 2010.