Reflected Benefit
The LG Economic Research Institute said on June 21 that the ongoing slowdown of the Chinese economy is negatively affecting its price competitiveness and dominance in global markets.
“International trade was boosted in and after the 1990s, when the Chinese economy began to grow at a rapid pace, and this resulted in economic booms around the world,” the institute explained, adding, “However, the growth of the Chinese economy had few positive effects on the export-oriented South Korean economy.”
According to the institute, the growth of the Chinese economy led to an increase in export similarity between South Korea and China. As a result, South Korea’s average annual economic growth rate fell from about 7% to 4% or so between 1990 and the 2000s while its domestic consumption edged up 3%.
China’s annual economic growth rate, however, dropped from over 9% to around 7% in 2012 and then to close to 6% last year. At the same time, Chinese workers’ wages and the prices of land in China rose while international raw material prices fell due to shortages in demand, leading to a narrower gap between South Korean and Chinese products’ prices.
Under the circumstances, South Korea’s trade conditions have improved since 2012 and South Korean products’ shares are on the rise in various markets such as the United States, Britain, Vietnam and Indonesia.
“The decline in the influence of China and the improvement of South Korea’s trade conditions are resulting in an increase in the profitability of South Korean companies nowadays,” said Lee Kuen-tae, senior researcher at the institute. He went on to say, “It is expected that South Korean firms will be able to regain market shares even in lost markets as production costs in China are continuing to rise.”