The South Korean government held a meeting presided over by Prime Minister Chung Sye-kyun and announced that it would increase trade finance by 3.1 trillion won and provide more assistance, such as temporary tariff reduction, for Covid-19-stricken companies.
In the first half of this month, South Korea’s average daily exports to China fell more than 25 percent year on year to US$360 million in the wake of the Covid-19 outbreak. China accounts for as high as 25 percent of South Korea’s total exports.
Under the circumstances, the government increases this year’s trade finance to 260.3 trillion won so that exporters’ financial conditions can be improved. This year’s trade finance is likely to exceed last year’s by more than 28 trillion won and non-large companies’ portion is estimated at a record high of 105 trillion won. The temporary tariff reduction is based on the application of ocean freight charges, which are less than one-15th of air freight charges, to parts and components urgently imported by air from China.
In the long term, the government is going to focus on supply diversification by promoting reshoring and reducing South Korean companies’ dependence on China. In this regard, Korea Development Bank, Industrial Bank of Korea and the Export-Import Bank of Korea will launch a 4.5 trillion won lending program for reshoring non-large enterprises so an interest rate of 1.5 percent can be applied to those meeting certain requirements.
In addition, the Restriction of Special Taxation Act is expected to be revised within this year so that corporate tax reduction can be applied to reshoring companies’ business expansion in South Korea as well as business foundation in the country.