From Imports to R&D
The Korea International Trade Association said on March 28 that South Korea’s trade deficit with China totaled US$5.0731 billion in January and February this year.
Five years ago, South Korea recorded its largest trade surplus with none other than China. However, its trade surplus with China dropped from US$55.636 billion to US$1.213 billion from 2018 to 2022. Now, China is where South Korea’s trade deficit is largest. In those two months, the deficits with Australia, Saudi Arabia, and Japan were approximately US$4.8 billion, US$4.6 billion, and US$3.5 billion, respectively.
According to the association, this has to do with the ongoing slowdown of the Chinese economy and its decreasing reliance on imports from South Korea. “Last year, China boosted its self-sufficiency in chemical products, plastics, rubber and machinery in particular,” it said, adding, “Finished product exports from China based on intermediate goods imports from South Korea are on the decline.”
It also pointed out that the deficit may last long as China is replacing imports with R&D and South Korea is increasing intermediate goods imports from China, particularly in EV battery-related fields. China’s import replacement, combined with South Korea’s high reliance on trade with China, is already seriously affecting South Korea’s overall exports, which fell 12 percent year on year in January and February.