South Korean Exporters Increasingly Relying on Chinese Market

The Korea International Trade Association announced on Jan. 19 that South Korea’s exports added up to US$512,788.73 million last year, including US$132,555 million to China.

In the wake of COVID-19, the total exports decreased 5.7 percent and the exports to China fell 2.8 percent in one year. The ratio of the latter to the former rose from 25.1 percent to 25.8 percent last year and exporters are expressing concerns over the increase in dependence on China.

The exports to China were led by semiconductor exporters. The semiconductor exports to China increased 6.9 percent last year. In addition, synthetic resin and steel exports rose 6.9 percent and 4.2 percent, respectively.

Views are divided on how to do business in China with the degree of dependence rising. South Korea faced China’s economic retaliation after the THAAD deployment in 2017, and then the necessity of export market diversification emerged. Nonetheless, South Korean exporters’ reliance on the Chinese market is showing no signs of falling.

Some point out that they need to focus on the domestic market of China. This is because the Chinese government declared in October last year that it would accelerate the growth of the domestic market for a shift from the export-driven economy.

Others point out that more business in China will lead to more potential risks in that the new U.S. administration’s policies in relation to China may result in clashes to affect South Korean enterprises in China. “The Chinese government’s domestic market expansion plan is based on self-procurement and self-supply from state-run companies, meaning South Korean companies will have to face even more competition,” one of them mentioned.

In the meantime, the association said that day that the United States, Vietnam and Hong Kong accounted for 14.5 percent, 9.5 percent and 6 percent of South Korea’s exports last year, respectively. The ratios of the top four states rose without exception whereas the proportion of Japan, the fifth-largest export destination, fell from 5.2 percent to 4.9 percent.