The Korea Herald

피터빈트

Korea warned of export dependency on China

By Korea Herald

Published : May 20, 2012 - 19:52

    • Link copied

Korea, celebrating the 20th anniversary of its official ties with China, needs to be cautious about its growing export dependency on the world’s second-largest economy, a report warned Sunday.

According to the report by the Korea International Trade Association, Korea’s exports to China saw a more than 50-fold growth from $2.65 billion in 1992 to $134.19 billion last year.

The portion of exports to China also soared from 3.5 percent to 24.2 percent during the same period. Over the past two decades, the trade surplus with China amounted to $272.54 billion, the report said.

The Chinese market has also offered sales channels of the nation’s fading industries such as leather and textile manufacturing, while strengthening the price competitiveness of Korean products made there globally.

The report, however, warned against this growing dependency.

In 2011, the nation’s export dependency on China was 24.2 percent, second only to Taiwan’s 27.2 percent.

When it comes to key items such as displays, semiconductors and computers, the dependency rate further increased to 30 percent, prompting concerns that Korean firms would be more vulnerable to an economic downturn in China.

As China’s industries experience a rapid modernization, the report said that Korea needs to target the local market directly rather than making products in China and exporting them to other foreign markets.

Since 2005, when Chinese companies started securing competitiveness in manufacturing, a growing number of Korean firms have stopped buying components from domestic firms.

As a result, the competitiveness of export products is weakening, with their market shares in China faltering since the late 1990s and starting to decrease in 2005.

“Considering exports to China have contributed greatly to the Korean economy over the past 20 years, there would be more business opportunities in the future as well,” said Lee Bong-geol, research fellow at KITA and author of the report.

“The free trade agreement with China, for which related discussions are ongoing, will strengthen price competitiveness of Korean companies and expand their exports to China.”

By Lee Ji-yoon (jylee@heraldcorp.com)