January 9, 2012 / 3:58 AM / 6 years ago

China media flags trade talks launch with South Korea's Lee

BEIJING (Reuters) - China will offer visiting South Korean President Lee Myung-bak the prospect of launching trade pact negotiations in the coming months, Chinese state-run media said Monday, holding out closer economic ties as a means to narrow political distrust.

Lee arrived in Beijing Monday for talks with President Hu Jintao and other leaders, and the China Daily said the two sides are looking to start negotiations for a three-way free trade agreement including Japan, and a separate two-way China-South Korea trade agreement.

An unnamed source from China's Ministry of Commerce told the paper that the China-South Korea bilateral trade pact talks "will probably start in the first half of the year."

Beijing has faced growing wariness from neighbors over its military modernisation and strategic intentions, especially over North Korea, which is sure to feature on Lee's agenda. The trade negotiations could offer an example of China using the prospect of greater access to its markets and investment to counter such distrust, an official Chinese newspaper suggested.

"Particularly with China's rapid development altering the relative balance of power between the two sides, problems have arisen in Chinese-South Korean relations that need urgent attention," said the overseas edition of the People's Daily, the official paper of China's ruling Communist Party.

"Above all there is the problem of mutual political trust," said a front-page commentary in the paper by Zhang Liangui, a prominent Chinese expert on Korean affairs.

Although Beijing and Seoul share broad aims on the divided Korean peninsula, Zhang said, "their different interests and positions have produced a negative impact on bilateral relations."

President Lee is likely to press China to lean on its ally North Korea to exercise restraint after the death last month of long-time leader Kim Jong-il, who was succeeded by his untested and largely unknown youngest son Kim Jong-un.

Some analysts have speculated that the young Kim may order a "provocation," such as a small-scale military attack or nuclear or missile test, to burnish a hardline image with the North's powerful military, whose support is crucial to him.

China is the North's sole major ally and economic partner, and it has repeatedly voiced confident in Kim Jong-un while also urging regional restraint and stability.

Seoul's ambassador to China, Lee Kyu-hyung, recently said that the South would continue to raise the issue of China's unwillingness to condemn North Korea when it provokes the South.

Despite Beijing's political support for North Korea, Chinese economic ties with South Korea are much larger.

In the first 11 months of 2011, China's trade with the South was worth $224.8 billion, a rise of 19.5 percent on the same months in 2010, according to Chinese customs data.

China's trade with North Korea was worth $5.2 billion in the first 11 months of 2011.

Since 2008, South Korea and China have conducted joint studies on their possible free trade deal.

Talks on the three-way China-Japan-South Korea free trade agreement could start as early as May, said the China Daily, citing the unnamed commerce official.

Reporting by Chris Buckley; Editing by Ed Lane

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