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Korea-China Competition Getting More Fierce on Export Front
The Growing China Threat
Korea-China Competition Getting More Fierce on Export Front
  • By Jung Suk-yee
  • August 9, 2018, 12:43
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The Korea-China export similarity index (ESI) in the eight major industries in 2016 hit a new record high of 0.47.

Korea’s export similarity index (ESI) with Chinese products skyrocketed to a record level in eight main export industries such as information technology (IT), automobiles and petroleum products. This means that quality gaps between Korean and Chinese products have narrowed down. Furthermore, a weak Chinese yuan boosted Chinese products’ price competitiveness, intensifying competition between Korean and Chinese companies in the export market.

According to the trade industry on August 8, the Korea-China ESI in the eight major industries in 2016 hit a new record high of 0.47. The figure is based on calculating the export competitiveness of the two countries in the world market based on UN Comtrade data.

The ESI means the proportion of two countries’ exports of an item in their total export volume. The closer an ESI figure to one, the more similar the two countries’ export structures are. The ESI of 0.47 in the eight major industries between Korea and China means that the export product structures of the two countries in the eight industries are 47% similar. The ESI in the eight major industries between Korea and China rose steadily from 0.403 in 2000, stayed between 0.42 and 0.46 from 2001 to 2016 and reached 0.47 in 2016 for the first time.

By sector, export similarity between the two nations in automobiles, steel products and petrochemicals soared. China's exports of finished cars and petroleum products have shot up since 2010. On the other hand, export similarity in the IT sector has been on the decline recently. This is because Korea's dependence on memory semiconductor exports has increased and Korea’s mobile phone exports have been sluggish, while China has expanded mobile phone exports significantly.

"China is closely trailing Korea in Korea’s main export industries. Korea is even losing its price competitiveness due to the weakening of the Chinese yuan against the Korean won due to the recent US-China trade war," said Jung Min, a researcher at the Hyundai Economic Research Institute. "We have to discover and develop new growth engine items such as bio items and new materials that China has not touched yet."