The Bank of Korea announced on December 7 that a 10% decline in China’s exports to the United States is likely to result in a 0.36% decline in South Korea’s exports to the United States.
According to the central bank’s recent report based on the World Input Output Table for 2014, 31.3% and 68.7% of the products exported from South Korea to China in 2014 were final goods and intermediate goods, respectively. In addition, China accounted for 43.8% of the final demand for the intermediate goods exported from South Korea to China and China was the final destination for 75.1% of the final and intermediate goods exported from South Korea to China. The ratio had been 64% in 2009.
In the meantime, the United States, Europe and Japan were the final destination for 5%, 4.3% and 2%, respectively. The percentage regarding the United States fell from 8.8% to 5% between 2009 and 2014. In other words, only 5% of South Korea’s exports to China were derived from the demand in the United States.
The Bank of Korea came up with the estimate based on this analysis. According to it, the electronics and semiconductor industry is likely to face a decline of 0.7% and the petrochemical industry is forecast to witness a decline of 0.5%. “The effect of China’s exports to the United States on the South Korean economy seems to have reduced compared to the past,” the central bank explained, adding, “The negative effect is expected to be alleviated at least to some extent even in the case of trade disputes between the United States and China.”