Turning Point in Relationship
South Korea sees five out 10 major export and import items to China and from China, such as semiconductor, flat display and wireless communication devices – overlap, facing growing competition with China.
According to a report “South Korea and China’s Industrial Economic Change and Tasks, Marking 25th Anniversary of Establishment of Diplomatic Ties” released by the Korea Institute for Industrial Economics & Trade (KIET), the industrial economic relations between the two countries is changing from vertical complementary to horizontal specialization and competition.
In particular, South Korea and China now have a similar structure of export items as China’s industrial and trade structure has been advanced. Accordingly, the two countries are facing growing competition in the global market. After the establishment of diplomatic relations, China’s industry and trade have shown a quantitative growth and have expanded from light industry and simple processing of raw materials to highly processed assembled products and component materials.
In 1992 when South Korea established the diplomatic tie with China, there were no export and import items to China and from China overlapped. However, five items were overlapped last year, including flat display, sensor, wireless communications devices, automotive parts and computer as well as semiconductor that ranks top in exports and imports. Accordingly, the KETI recommended that South Korea develop differentiated products from China in terms of function, performance and design.
According to a report “South Korea and China’s Economic Relations Medium and Long Term Change Trend and Tasks” released by the KOTRA on the same day, the relations between South Korea and China with 25 years of the diplomatic ties should be approached from a “market integration” standpoint. As the economic relations between the two countries have entered the 3.0 phase of “market integration,” passing through the 1.0 phase of specialized cooperation through specialization and the 2.0 phase of intensified cooperation, South Korea needs its strategy for economic cooperation with China. The KOTRA said the Korea-China FTA is the most meaningful change in the 3.0 phase of market integration and South Korea should examine the economies of scale caused by the market integration of the two countries and new markets, including reverse overseas direct purchase, more carefully. The country also should eye on China’s policy market such as “One Belt One Road” project, regional development and environmental protection.
Meanwhile, South Korea and China had the gross domestic product (GDP) of US$350 billion (395.82 trillion won) and US$427 billion (482.89 trillion won) in 1992, respectively, maintaining the similar level. However, the figures grew to US$1,411 billion (1,590.9 trillion won) and US$11,199 billion (12,626.87 trillion won) last year. In short, China now has an 8 times bigger GDP than South Korea. South Korea’s per capital income was 21.9 times larger than China but the gap decreased to 3.4 times over the same period. The nation’s exports to China increased by 46.1 times from US$2.7 billion (3.04 trillion won) to US$124.4 billion (140.26 trillion won), while its imports from China grew by 23.5 times from US$3.7 billion (4.17 trillion won) to US$87 billion (98.09 trillion won).