Most Korean Companies Regarding Global Value Chain Reshaping as Inevitable

The Korea Chamber of Commerce and Industry (KCCI) recently conducted a survey with 300 South Korean manufacturers and announced on Sept. 27 that 41.7 percent and 27.3 percent of the respondents answered that they were feeling and anticipating changes in global value chains, respectively.

The spread of infectious diseases such as COVID-19 was mentioned by 72 percent of the respondents as the factor with the largest impact on the reshaping of global value chains. “The reshaping is accelerating in the wake of COVID-19 after a gradual change based on China’s economic growth, increasing trade protectionism, Industry 4.0, etc.,” the KCCI explained.

No less than 40.8 percent of the respondents answered that the reshaping would have negative effects whereas the opposite answer was given by only 6.5 percent. In addition, most of the respondents said that each factor of the reshaping would act as a risk factor rather than an opportunity.

On a scale of one to five, they said that the advancement of the manufacturing sector of China would lead to a crisis with a likelihood of 2.1 and infectious diseases, U.S.-China trade disputes and Japan’s export curbs would have the same effect with 2.2, 2.7 and 2.8, respectively. They also said that the acceleration of Industry 4.0 would present an opportunity with a likelihood of 3.1.

According to the respondents, the reshaping of global value chains is likely to contract forward participation and backward participation alike. Specifically, 41.1 percent and 18.1 percent answered that the forward participation, that is, the overseas sales of intermediate goods would decrease and increase, respectively. Likewise, 34.7 percent and 10.3 percent answered that the backward participation, that is, the purchase of intermediate goods from abroad would decrease and increase, respectively. In addition, 44 percent of the respondents replied that they were yet to respond to paradigm shifts such as Industry 4.0.