A free trade deal between South Korea and China is expected to yield about $28.6 billion (30 trillion won) worth of economic benefit in the next 10 years, Citibank analysts said on Tuesday.

This was calculated based on the tariff elimination goals of the deal that call for lifting 71 percent of tariffs within the next 10 years, and ultimately 91 percent of them in 20 years, Citibank Korea chief economist Chang Jae-chul said at the bank’s forum held in Seoul.

“The agreement, which is likely to go into effect in late 2015 or early 2016, is expected to create $28.6 billion won in 10 years as reduced tariff burdens expand trade opportunities and production,” Chang said.

Chang, however, warned that with China fast on Korea’s heels to close the technological gap, such economic advantages may be limited.

“For instance, in the case of shipbuilding, the technological gap is only two years in the two countries. China is catching up fast in many other sectors, with the average gap being just 1.2 years,” Chang explained.

Speaking from China’s point of view, Citibank China senior economist Shuang Ding stressed that the bilateral trade is more than just a simple FTA for China.

“Through the trade deal, the Chinese government is seeking external pressure for domestic reform. And the FTA will not be the end of the two markets’ integration,” he added.

The latest FTA struck on Nov. 10 is the 13th of its kind for South Korea. With China being South Korea’s largest trading partner, the deal is expected to be the biggest ever to be signed by Asia’s fourth-largest economy. 

By Suk Gee-hyun (monicasuk@heraldcorp.com)