Financial Vulnerability
The Korean financial industry’s exposure to China was found to be the highest in the world. Thus, it is concerned that a slump in the Chinese economy will have a negative impact on the Korean economy. According to the financial investment industry, Korean banks’ foreign credit added up to US$140 billion in the first quarter of this year. Exposures related to China stood at US$24.5 billion, accounting for 17 percent of the banks’ total credits, which was the highest in the world.
Korea was followed by Taiwan (10.4 percent), UK (5.1 percent), Australia (3.3 percent), the United States (2.8 percent), and Japan (2.1 percent). France, Germany, Chile, and Canada and others inked one plus percent.
In terms of the volume of absolute exposure to China, the U.K. (US$181 billion), the U.S. (US$87.8 billion), and Japan (US$75.5 billion) eclipsed Korea, but in terms of their proportions in foreign credits, Korea towered over them. In terms of the proportion of foreign direct investment (FDI) in China in GDP, Korea recorded 5 percent, which was higher than both Japan's 4 percent and Germany's 2 percent.
“As Korea has high exposure to China in all sectors such as banking, FDI, and trade, Korea should pay more attention to a slowdown in the Chinese economy,” a recent JP Morgan report said.