Transformation of China
Korea faces slowing export growth, as China has been undertaking structural reforms that would mean a shift from its export-led growth strategy. China currently exports a lot of finished products that are assembled with parts imported from Korea.
Chinese President Xi Jinping has pledged to stabilize economic growth while pushing ahead with reforms. Xi and other leaders of China’s Communist Party approved recently a spate of bold reform measures to loosen the party’s control over the national economy.
“To change ways of economic development, China is expected to pursue growth led by domestic demand, rather than growth led by exports and state-driven investment,” Chung Soon-won, a policy board member of the Korean central bank, said at a conference in Beijing on November 21.
“The change of Chinese development policy would slow its gross domestic product growth while bringing in a decline of Korea’s export growth,” Chung said.
“China’s economic growth will still depend on investment in the coming years, not private consumption, though China is moving ahead in its economic transformation,” said Song Guoqing, an academic adviser to the People’s Bank of China who attended the conference, arguing, “I don’t agree with the opinion that a shift of paradigm in the Chinese economy, including expansion of consumption and restriction of investment, is urgently needed.” He added, “There are no signs of a rapid rise in private consumption.”
China is Korea’s largest trading partner with bilateral trade volume reaching US$256.3 billion last year.