Korean Government Advised to Play a More Active Role
Nowadays, both the United States and China are putting increasing pressure on South Korean enterprises so that they do not increase their investment in China and the United States, respectively. The two superpowers are their most important trade partners and their concerns are growing under the circumstances.
On Nov. 20, U.S. Trade Representative Katherine Tai had a meeting with South Korean entrepreneurs arranged by the Federation of Korean Industries, the American Chamber of Commerce in Korea and the U.S. Embassy in Seoul. The meeting was attended by the presidents and vice presidents of Samsung Electronics, Hyundai Motor Group, LG Energy Solution, SK On, DB HiTek, Hanwha Solutions, etc. At the meeting, she stressed the United States’ vision on a new economic framework in the Indo-Pacific region.
According to the Korea International Trade Association, South Korea’s exports to China and the United States added up to US$132.565 billion and US$74.116 billion in January to October this year, respectively. In that period, they accounted for 25.9 percent and 14.5 percent of the exports, respectively. In addition, South Korea’s imports from China and the United States were US$108.885 billion (23.3 percent) and US$57.492 billion (12.3 percent), respectively.
The ongoing disputes between the United States and China are acting as a significant variable on South Korean enterprises’ activities. Their investment decisions based on the principle of market economy are increasingly interpreted as siding with either the United States or China. For instance, SK Hynix is planning to install EUV lithography equipment from ASML in its plant in Wuxi, China and Reuters recently reported that the U.S. government may put a brake on the plan.
South Korean EV battery manufacturers are sharing the same concerns. At present, they are heavily dependent on raw materials from China with raw materials accounting for 70 percent or so of the prices of such batteries. “China may weaponize such raw materials and the United States may impose retaliatory tariffs,” said an industry source.
The disputes are likely to continue for a while. The 2022 U.S. Senate elections are scheduled for November and Chinese President Xi Jinping’s third term will start next year. Both are likely to utilize the disputes to gather more supporters. “The U.S. government is expressing concerns over China’s state-led economy and its impact on the national interest of the United States,” an expert said, adding, “The United States will expand its alliances in order to keep China in check.”
“South Korean enterprises are stuck between the two superpowers and they cannot deal with the situation on their own,” the Federation of Korean Industries pointed out, continuing, “The South Korean government needs to play a more active role.”