South Korean Economy Becoming Increasingly Reliant on China

The Bank of Korea pointed out in a report that the South Korean economy is still heavily reliant on imported raw materials and capital goods and a small number of exporting countries, including China, still account for most of the imports.

“South Korea’s dependence on China’s raw materials and certain technological items is continuing to increase as domestic procurement is costly, uncertain or insufficient,” the bank said in the report, which was contained in the June issue of the bank's monthly bulletin, "Macro Economy."

The bank said Korea's high reliance on China is leading to a higher level of import supply chain vulnerability in the South Korean economy, which is already highly dependent on a small number of trade counterparts such as the United States and Germany.

According to the central bank, South Korea’s import supply chains as compared with global chains are particularly vulnerable on the raw material side and its vulnerability in relation to the Chinese economy is continuing to rise.

“South Korea’s import supply chain vulnerability is more serious in items such as semiconductor equipment and precision equipment than in capital goods such as machinery, transportation equipment and electronics,” it went on to say, adding, “This analysis is based on the methodologies of the European Commission and the IMF.”