New social insurance treaty to boost S.Korean investment

South Korea's investment in China is expected to gain a boost in the wake of the latest bilateral agreement on mutual exemption of social insurance premiums, the South Korean Embassy in Beijing said in a statement e-mailed to the Global Times Monday.

"(People in) China, especially in the country's coastal regions, are no longer on a low income, and the enforcement of the (revised) social security law adds a burden for South Korean firms doing business in China," said the statement. The additional expenditure on social security undertaken by South Korean firms in China is equivalent to roughly 56,008 yuan ($8,964.48) per employee per year, based on the social security standard in Beijing, according to the statement.

South Korea and Germany are the only two countries that have inked reciprocal social security agreements with China to avoid duplicate payments.

China's revision of its social security law last year requires all foreign employees to pay a contribution toward pensions as well as medical insurance, unemployment benefit and maternity leave.

"Many South Korean enterprises have been forced to transfer their bases to Southeast Asian nations with lower salaries," said the statement, but the new bilateral agreement could help lower costs for South Korean firms and prevent them from leaving.

The agreement, which is expected to take effect later this month after approval from South Korea's parliament, came amid rising concerns over China's appeal for foreign investors, given rising labor costs and a slowdown in the economy.

Some South Korean firms have been leaving Qingdao, Shandong Province since the second half of the year, although fewer companies have left than in 2008, said a report in the latest issue of Caijing magazine published Monday.

Hao Yansu, dean of the School of Insurance of the Beijing-based Central University of Finance and Economics, offered a note of caution.

"The impact of social security agreements in mutual economic ties is actually not that big, as China is less active in forging such treaties with other countries, and China's overseas expansion remains at a primary stage," Hao said Monday.

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