Thursday, December 12, 2019
South Korea Faces ‘Aging Economy’ While China Initiates Huge Innovation Drive
Overtaking IT Korea
South Korea Faces ‘Aging Economy’ While China Initiates Huge Innovation Drive
  • By Jung Suk-yee
  • August 31, 2016, 02:00
Share articles

China is initiating a huge innovation drive to become a global Internet powerhouse while South Korean economy is aging at a rapid pace.
China is initiating a huge innovation drive to become a global Internet powerhouse while South Korean economy is aging at a rapid pace.

 

China is said to initiate a huge innovation drive to become a global Internet powerhouse through the 13th Five-Year Plan (The 13-5 Plan for 2016-2020), a roadmap for the nation's development from 2016 to 2020. On the other hand, Korea’s economy is aging at a rapid pace as the country has failed to create a new leading industry that succeeds the information and communications technology (ICT) industry.

According to a report entitled “China’s Industry Development Direction and Assessment of The 13-5 Plan,” published by the Korea Institute for International Economic Policy (KIEP) Beijing Office on August 29, the plan is characterized by the “promotion of Internet Economy” and the Chinese government is aggressively pushing ahead with a new national strategy based on big data, cloud computing and Internet Plus. When taking a look at the action plans for the 13-5 Plan that have been confirmed in a stream, China is accelerating the construction of highly efficient next-generation information infrastructure, such as the fifth generation mobile communications system and ultra wide band Internet Protocol Version 6 (IPv6), to expand the Internet economic space. KIEP said, “China plans to upgrade the network speeds in large, medium and small-sized cities and rural areas by establishing the advanced communication networks and to build the optical fiber networks in 98 percent of administrative villages.”

The Chinese government also included the “Blue Economy,” which pursues the integrated land- and ocean-based development, in the 13-5 Plan. It plans to focus on promoting the marine biologics and marine equipment manufacturing industries through the application of seawater desalination scale improvements. In this regard, the country will set up the online Silk Road and information port by completing the multinational cable infrastructure between land and sea. An economist said, “China will complete the construction of the new Internet-driven economy after finishing the 13-5 Plan in 2022 when it marks the 30th anniversary of the establishment of the diplomatic relations between Korea and China. When the current trend continues, China is also highly likely to overtake Korea in the ICT sector during the period.”

Korea is suffering from an “industrial aging economy syndrome” at the level of developed countries after the economy in the private sector, including ICT which was the country’s growth engine, has lost its vitality. Hyundai Research Institute released a report entitled “Characteristics of Recent Korean Economy through Analysis on Growth Factors,” saying, “The ICT industry, which has played a pivotal role in driving the growth after the 2000s, is seeing a growth slowdown due to the market and industry maturization. However, Korea’s economy is losing its dynamism since there is no new leading industry after the ICT.” The growth rate of secular real gross domestic product (GDP) in the ICT industry stood at 1.2 percent in the first quarter this year compared to the previous quarter, down from 5.2 percent in the first quarter of 2000.

The secular economic growth rate as a whole dropped from 1.4 percent to 0.7 percent over the same period. Accordingly, the gap between the ICT industry growth rate and economic growth rate shrank from 3.8 percent point in the first quarter of 2000 to 0.5 percent point in the first quarter this year. In addition, the investment in intellectual property is plunging. The ratio of fixed investment to intellectual property product investment fell from 19.6 percent in the first quarter of 2015 to 18.5 percent in the second quarter this year.