Korea's Auto Industry Needs Restructuring, Top FSC Official Says

South Korea needs to be prepared for the possibility of the ongoing trade dispute between the United States and China evolving into an all-out war, warned a top official of the Financial Services Commission (FSC).

Kim Yong-beom, vice chairman of the FSC, said the Korean economy has already suffered a harsh blow from the U.S.-China trade conflict. "Korea needs to revamp its export industries and foster new growth sectors," he said.

Kim delivered a speech at a conferene organized by the Korea Chamber of Commerce Industry (KCCI) on Nov. 12.

Kim pointed out the need to restructure the ailing automobile industry. He said the government needs to help domestic auto companies to shift their focus to environment-friendly cars and smart vehicles.

Kim said the negative investor sentiment prevailing in today’s global financial market is attributable mainly to the possibility of a recession resulting from a decline in global liquidity and concerns over the U.S.-China trade dispute undercutting global economic growth.

According to him, the U.S. benchmark rate will exceed its neutral interest rate of 3% if the Fed raises its interest rate three more times. This, he said, could trigger a recession.

He also said that the trade dispute between the two superpowers can be defined as a hegemony battle and, therefore, it can evolve into an all-out war including a currency war.

Kim said Korea is more vulnerable to this dispute than any other country and it is in this context that the IMF recently lowered its 2019 growth forecast for South Korea more than those of the U.S. and China and the global average.

For the development of the Korean financial industry, Kim mentioned two urgent tasks, capital market innovation and develoment of fintech.  

“To upgrade the capital market, it is necessary to improve the funding channels for companies and reform the listing system," Kim said.

“When it comes to fintech, the FSC is currently working on a special law while running three different types of financial test beds.” He also explained that blockchain technology can be better utilized in the financial sector, although some point out the bitcoin has degenerated into a tool of speculation.