Irony of Trade Surplus
The Bank of Korea announced on June 17 that South Korea’s current account surplus for last year is estimated at US$105.87 billion, up 25.5% from a year ago.
Such a large surplus can be attributed to the amount of imports showing a greater decline than the amount of exports. By region, figures with respect to China and the United States dropped while deficits with respect to the Middle East and Europe were reduced.
Last year, South Korea recorded a current account surplus of US$45.14 billion in its trade with China. The amount had hit a record-high of US$56.69 billion in 2013 but fell to US$56.06 billion in 2014 and then fell by 19.5% last year. The goods account surplus, in particular, reached US$34.33 billion last year to hit a four-year low.
This trend is likely to continue for the time being. The Chinese government has focused on domestic consumption since 2008 and Chinese enterprises are replacing more and more intermediary goods with domestically-produced ones. According to the Korea International Trade Association, South Korea’s exports to China totaled US$38.14861 billion for the first four months of this year, down 16.4% from a year earlier.
In the meantime, South Korea’s current account surplus vis-à-vis the U.S. declined 17.4% year on year to US$33.85 billion last year with its chronic service account deficit increasing 30.7% to US$14.38 billion, the highest level since 1998.