Limited China Trade
Industry watchers say that exports have decreased due to overseas manufacturing, which could have an adverse effect on overall exports.
According to the “Processing and Intermediary Trades’ Scale Estimation and Its Implications” released by Hyundai Research Institute (HRI) on July 12, exports through overseas local production accounted for 17.4 percent in overall exports in 2012, and the figure decreased to about 15 percent last year.
Exports through overseas local production are composed of processing trade and intermediary trade. The amount of processing trade exports increased to US$94.6 billion (106.91 trillion won) in 2012, but decreased to US$82 billion (92.67 trillion won) in 2014. The net amount of intermediary trade export increased from US$10.1 billion (11.41 trillion won) in 2012 to US$14.6 billion (16.5 trillion won) in 2013, but slightly dropped to US$13.7 billion (15.48 trillion won) last year.
The decrease in overseas local production exports is largely due to China’s recent policy to limit processing trade within the country, on which domestic companies have a high level of dependence. Last year, China accounted for 67.2 percent in domestic companies’ processing trade.
Another factor is that each countries’ policy is favorable to its own companies, which worsens the business condition of foreign companies. The change in the environment can reduce foreign direct investment of companies. The manufacturing industry’s foreign direct investment year-on-year decreased by 13.2 percent in 2012, went up 9.7 percent in 2013, and dropped by 21.6 percent in 2014 again.
In fact, the increase in the parts and materials sector stood at 3.8 percent in 2013 and 4.9 percent in 2014. However, the figure increased by only 2.8 percent from a year ago in the first quarter this year. A senior research analyst said, “We should vitalize the processing and intermediary trades by expanding investment in core technology development and the new growth manufacturing industry at home, and also by establishing a division system to secure materials and reduce production cots abroad. Also, we need to lower overseas production dependence on China and seek out new overseas production bases.”