Since Shinzo Abe became Japanese prime minister for the second time, relations between China and Japan have gone from bad to worse, and this is having a far-reaching impact on trade between the two countries.

While trade data by country show Japan remains the second-largest trading partner of China after the United States it is likely to be replaced by South Korea if relations continue to sour. Statistics from China's General Administration of Customs show that trade between China and Japan was $329.45 billion in 2012, down 3.9 percent year-on-year, the first decline in three years. Over the first eight months of this year there has already been a year-on-year decrease of 8.5 percent, while over the same period bilateral trade between China and South Korea has grown by 9.4 percent year-on-year to $179.18 billion.

Over the past few years, the gap between the trade volume between China and South Korea and the trade volume between China and Japan has gradually narrowed. In 2010, the trade volume between China and Japan was $297.77 billion, while the trade volume between China and South Korea was $207.17 billion. However, that gap of more than $90 billion had narrowed to about $73 billion by 2012, and it has now dropped to $20.9 billion. With the economic and trade cooperation between China and South Korea deepening, especially with the ongoing negotiations for a free trade agreement, economic and trade cooperation between China and South Korea will enter a new period of development, and South Korea could catch up with or even overtake Japan to become China's second-largest trading partner in terms of trade volume by country.

China and South Korea are complementary on the economic front, and within two decades, China has become both South Korea's largest-trading partner and a major destination for South Korean investment. The progress has been remarkable; especially given the bilateral trade volume has grown faster than the China-US or China-Japan trade volume. For the past 12 years, the trade volume between China and South Korea has maintained an average annual growth rate of nearly 19 percent, while the average annual growth rate for trade between China and the US was 17.6 percent and for trade between China and Japan 12.8 percent.