Threats to Korean Exports
China’s acceleration of localizing major materials and components will give an impact on the exports of Korean intermediary products, as the country is realizing the high value addition and escaping from the low value added production process, according to an analysis.
According to the “China’s Role Change in the Value Chain and Its Implication” report unveiled on August 21 by Hyundai Research Institute, the total amount of components imported in China last year was US$580.8 billion, which decreased by 3.0% from a year ago. On the other hand, the self-sufficiency rate of intermediate inputs based on the value added has been in the rise since the mid 2000s. The intermediate input self-sufficiency rate was only at 87.1% in 2005, but it reached 93.3% in 2011, showing a rising trend.
Effected by the likes including the reduction in processing trades, the re-export rate of imported intermediary products decreased by 11.1%p, from 58.3% in 1995 to 47.2% in 2011. The increase of intermediate input self-sufficiency rate and the reduction in the proportion of re-exports in China mean that the Chinese manufacturing sector is slowly deviating from the assembling and processing role.
The dependence on China of Korean intermediary product exports, however, is still high amid the China’s decreasing demand for imports of components. In terms of value added, 37.4 % of the Korea’s total value added exports come from China.
The forward engagement rate of manufacturing, which means that China is engaged in the total exports around the world by exporting intermediary products, increased to 12.4% in 2011, compared to 11.6% in 2008. The forward engagement rates in the automobile industry and the metal industry including steel, copper, and zinc are already higher than those of Korea.