South Korea’s share of China’s import market fell to 6 percent last year. This is the lowest level in 30 years since 5.2 percent in 1993, the year after the establishment of diplomatic relations between South Korea and China. South Korea also slipped to third place in the rankings of countries from which China imported goods.
According to the Korea International Trade Association (KITA), China imported US$162.5 billion won worth of goods from South Korea in 2023. The amount was down by 18.8 percent from 2022. It accounted for 6.3 percent of China’s total imports. According to the Chinese government, China’s overall imports in 2023 totaled US$2.568 trillion, down by 5.5 percent from 2022.
South Korea slipped from second place to third behind Taiwan (7.8 percent) and the United States (6.5 percent) in the rankings of countries from which China imported goods. The collapse of the international division of labor in which South Korea exports intermediate goods and China processes them into finished products and sells them has made South Korea’s main export items such as petrochemicals, steel, and petroleum products lose ground in the Chinese market and weakened South Korean products’ presence in the Chinese market.
Last year, South Korea’s 7 percent share of China’s import market collapsed as a slump continued in the South Korean semiconductor industry, which had been the main engine of South Korea’s exports. South Korea ranked first in the rankings of countries which China imported goods from for seven consecutive years between 2013 and 2019. However, its share has been declining year by year as Korean-made smartphones, cars, and displays have gradually suffered slumps in the Chinese market.
China’s economic retaliation against South Korea for the deployment of the THAAD system in 2017 accelerated this trend, experts say. In 2016, just before the beginning of China’s economic retaliation, South Korea’s share of China’s import market was 10.4 percent. However, the downward curve steepened with 9.9 percent in 2017, 9.7 percent in 2018, 8.4 percent in 2019, 8.4 percent in 2020, 8.0 percent in 2021, 7.4 percent in 2022, and 6.3 percent in 2023. Samsung Electronics was the number one smartphone maker in China with a 20 percent market share until 2013. But the Korean smartphone giant has been losing ground to Chinese companies such as Huawei and Xiaomi. Hyundai and Kia enjoyed a combined market share of 7-plus percent in the Chinese automobile market during their heyday in the 2000 but not any longer these days.
Since the mid-2010s, China has been promoting manufacturing with its “Made in China 2025” Program. With the exception of high-end semiconductors and some display products, few Korean-made products now have competitiveness. As for petrochemicals, a typical intermediate product, has seen China’s self-sufficiency rate for general-purpose products such as intermediate raw materials and basic oils rise to more than 90 percent, causing Korean exports of them to fall from US$23.5 billion in 2013 to US$17 billion last year. Prior to the outbreak of COVID-19, China’s self-sufficiency rate stood at about 60 percent, but after several years of facility expansion, China no longer imports them from South Korea.
South Korean business-to-consumer (B2C) products such as cosmetics, which were once very popular in China, are also on the wane in China. South Korean automobiles, which reached a record high of US$70.9 billion in exports last year, only posted sales of US$300 million in China. As for secondary batteries, which are considered a new export driver for Korea, Korea imported secondary batteries worth US$8.3 billion from China, exceeding the value of Korea’s secondary battery exports to China (US$500 million) by 16 times.
Amid this weakening of Korea’s export competitiveness, semiconductors, which have been a pillar of Korea’s exports to China, also shrank in 2023 as global IT demand plummeted after a surge during the COVID-19 pandemic. In 2023, South Korea’s semiconductor exports to China plunged 30.6 percent year on year to US$36.1 billion. As a result of the plunge, the percentage of China’s imports from South Korea in China’s total imports descended by 18.8 percent from US$200.2 billion in 2022 to US$162.5 billion in 2023.