China's South Korea investment soars ahead of free trade pact

Chinese investment in South Korea is surging ahead of a free-trade agreement between the two countries while Chinese funds going into Japan have dwindled in part due to geopolitical tensions between Beijing and Tokyo.

Chinese investment in Korea jumped 374 per cent to US$631 million last year from US$133 million in 2013, according to Mergermarket, an international provider of deal information. This compared with just US$28 million in 2010.

So far this year, Chinese investment in Korea has nearly doubled compared with the whole of last year, with Anbang Insurance Group's US$1 billion acquisition of 63 per cent of Tong Yang Life Insurance, a Korean insurer, the biggest single transaction. Tong Yang announced the Chinese insurer's investment last month.

"Since 2013, we see increasing Chinese investment in volume and value in South Korea because of the upcoming free-trade agreement between China and South Korea," said Jennifer Zhang, a Shanghai-based financial researcher of Mergermarket. "China's investment in South Korea will keep increasing because everyone is expecting the free-trade agreement to be signed later this year, which will be helpful to investment between both countries."

Last month, China and Korea completed their free-trade agreement talks and drew up a draft agreement, the Ministry of Commerce announced.

In November last year, the ministry said the agreement would be signed this year and would take effect in the second half.