In the Middle
The Korea Center for International Finance said in its report on April 3 that South Korea’s response needs to be more precise amid the ongoing U.S.-China rivalry in high-tech industries.
The United States is continuing to curb China using the Inflation Reduction Act, the CHIPS Act, the Indo-Pacific Economic Framework, and others. Semiconductor companies with subsidies from the U.S. government cannot increase their production in China, and the members of the framework are discussing shaping their supply chains.
China is responding by controlling the export of certain items and technologies and targeting certain companies. The Ministry of Commerce banned the export of rare-earth element processing techniques in February and is considering applying the same to photovoltaic technologies. In addition, the Chinese government announced that it would conduct security checks on Micron Technology products.
According to the center, the South Korean economy is vulnerable to the rivalry. Exports from South Korea to China account for 27 percent of South Korea’s total exports and to the United States is 16 percent. As for semiconductor chips, the most important export item for South Korea, exports to China account for no less than 55 percent. On the supply side, Chinese supply chains make up 19 percent of South Korea’s total output. In 2021, South Korea’s investment assets in China amounted to US$164.6 billion and long-term direct investment accounted for 62 percent of the total.
The center pointed out that the vulnerability can be overcome by closer cooperation with the United States, more indirect joint business in China and efforts for technological refinement.