China is rapidly increasing its export of high technology products to South Korea, as Chinese technology is rapidly narrowing the gap with South Korea.
According to a Hyundai Research Institute report on the South Korea-China Import penetration rate’s features and implications, Chinese products’ import penetration rate in the South Korean market was 6 percent in 2013, having increased twice from 2.6 percent in 2000.
On the contrary, the South Korean product import penetration rate in the Chinese market decreased from 3.0 percent in 2004 to 1.4 percent in 2013. That is, while Chinese products are rapidly encroaching on the South Korean domestic market, the latter’s penetration into the Chinese market is shrinking.
The types of the top 10 products that South Korea imported from China are rapidly changing from low technological to high technological. In 2000, China’s top six exports consisted of foods, fiber, and clothes.
In the recent expansion of the Chinese import penetration rate, China’s Information Technology product import penetration rate and import share in the South Korean market increased to a great extent. In the South Korean market, the import penetration rates of most Chinese products are continually increasing, except with food.
Particularly, the import penetration rate of the Chinese IT industry (e.g. computers and semiconductors) increased 4 times, from 3.9 percent in 2000 to 15.5 percent in 2013, suggesting that the Chinese technology is rapidly chasing South Korean.
On the contrary, the import penetration rate of South Korean high technology products increased from 5.5 percent in 2000 to 10.1 percent in 2013. Middle and low technology products are also continually decreasing from 2.1 percent and 2.5 percent in 2000 to 1.0 percent and 0.2 percent in 2013, respectively.
In 2013, the Chinese import share of high technology in the South Korean market was 32.2 percent, 9.6 percent higher than in 2000. The average import penetration rate was 136.7 percent in 2013, 131.8 percent higher than 2000.
The effect of the South Korea-China Free Trade Agreement may more rapidly change South Korea’s import structure with China, further decreasing the South Korean surplus of its trade with China, the Hyundai Research Institute pointed out. In 2014, the South Korean import growth rate with China overtook its export growth rate, which decreased the surplus of its trade with China by US$10 billion.