Unstable Foundation?
South Korea's economic dependence on China has increased significantly after establishing diplomatic ties, a private think tank said, raising the need for policy efforts to cope with growing risks from the neighboring country, including an economic crisis.
According a report, called “Meaning and Implications of the 23rd Anniversary of Diplomatic Ties Between Korea and China” published by Hyundai Research Institute (HRI) on Aug. 20, trade between the two jumped 37-fold from US$6.38 billion (7.59 trillion won) in 1992 to US$235.37 billion (280.09 trillion won) in 2013, after the two established diplomatic ties in 1992.
South Korea's exports to China, in particular, represented 25.3 percent of its total overseas shipments last year, up from 3.5 percent in 1992, the report showed. Accordingly, China has become the largest export market.
The export similarity indexes (ESI) between Korea and China in eight primary export industries have all risen. In 2013, the shipbuilding industry had the highest Korea-China ESI with 0.86, followed by precision machinery and the petrochemical industries with 0.76, steel products with 0.66, IT with 0.64, steel with 0.58, machinery with 0.54, and automobiles with 0.47.
Direct investment surged as well. South Korea's direct investment in China jumped by 17-fold from US$220 million (US$261.8 billion won) in 1992 to US$3.75 billion (4.46 trillion won) last year. China's direct investment in Korea grew 1,100 times, with the amount skyrocketing from US$1 million (1.19 billion won) in 1992 to US$1.19 billion (1.42 trillion won) last year.
Technical trade between Korea and China increased 19 times from US$190 million (226.1 billion won) in 2001 to US$3.63 billion (US$4.32 trillion won) in 2013. Exchange of human resources between the two also rose 15 times from 708,000 in 1995 to 10.31 million in 2014.