The New Normal
The Korea Economic Research Institute said on Nov. 3 that Korea’s exports to China have been on the decline since the Chinese government launched the New Normal policy last year.
The trade balance between Korea and China has decreased since 2013. Last year, the trade balance totaled US$52.2 billion, down 12 percent from a year ago. During the first three quarters of this year, Korea’s trade surplus vis-à-vis China declined by approximately 13 percent year-on-year to US$35.3 billion, too. The ratio of the surplus to the trade balance decreased from 27.4 percent to 23.4 percent between 2013 and last year, and to 20.9 percent in the three quarters.
The exports of 10 major items are plummeting with few exceptions. Between January and September this year, industrial electronics and petroleum products recorded a negative export growth of 65.8 percent and 35.7 percent, respectively. The percentage was 14.4 percent for synthetic resin, 39.5 percent for basic petrochemicals and 14 percent for equipment components. In the meantime, the imports of 10 major items edged up by 1.6 percent. Those of semiconductor and flat panel display & sensor products each went up by 45.4 percent and 2.8 percent, while steel sheets posted a decrease of 26.6 percent.
In short, Korea’s component and material exports to China are being affected by the New Normal policy, with the technological strength of Chinese companies being enhanced and Chinese consumers seeking more diverse and better products. Under the circumstances, some experts point out that the advancement of China’s industrial structures and less processing trade opportunities resulting from the policy could be a bigger threat than an interest rate hike by the Fed, in view of Korea’s industrial structure highly dependent on its exports to China.