China’s economic slowdown affects South Korea’s major industries


News analysis

With China’s sharp slowdown, South Korea is concerned that its export industry, including semiconductors, steel and other major industries that rely heavily on the Chinese market, will experience a major recession.

According to data released by the Federation of International Trade Associations (KITA) on January 18, South Korea’s exports to China in 2021 were $ 162.9 billion, accounting for about 25% of total exports. Among them, semiconductor exports to China alone accounted for 39.3% of the total semiconductor exports in the south.

Over 80% of exports to southern China are intermediate goods. The outlook for China’s real estate sector is uncertain, which could affect the southern machinery and steel industry.

Slumping demand in China could also affect South Korean consumer electronics and cosmetics exports.

Petrochemicals, South Korea’s major exports, will also be hit hard. Yonhap News Agency quoted a source from the Korea Petrochemical Industry Association, saying that China is the largest export market for petroleum products in the South. Also, China’s economic growth is lacking momentum, which will have a major impact on petrochemical and related industries in the South.

Of South Korea’s 10 major export sectors to China, semiconductors account for 30.8%, followed by synthetic resins (6.1%), flat panel displays (4.8%) and petroleum products (4.2%).

According to sources, the Korean petrochemical industry is already in a difficult situation due to shrinking domestic and foreign demand and rising oil prices, leading to oversupply. And the weakness of the Chinese economy will make the industry even more difficult.

Hyundai Institute predicts that if China’s economic growth rate declines by 1%, South Korea’s economic growth rate will decline by 0.5%.

“It shows how dependent our economy is on China,” the Korea Times commented on the forecast in an editorial published on January 19. According to the article, Korean industry needs 1,850 raw materials and commodities, more than 80% of which are from China. China’s harsh economic outlook can be disastrous for the global economy, and South Korea can be more vulnerable to China’s economic weaknesses than any other country in the world.

On January 20, the Korea Economic Daily also published an article on growing concerns about the heavy dependence of the industrial sector on China. Not only steel, petrochemicals and heavy machinery, but also high value-added industries such as semiconductors, monitors and batteries have acquired several production bases in China.

“In other words, all major domestic industries are involved. China’s crisis is likely to be transferred to [South] South Korea, “said the article.

Trader watch
Currency traders are monitoring monitors at the Forex Trading Office at KEB Hana Bank Headquarters in Seoul, South Korea on January 25, 2022. (AhnYoung-joon / AP Photo)

Reasons to reduce dependence on China

South Korean experts are calling for authorities to use this as an opportunity to change their export structure.

Lee Tae-kyu, a senior researcher at the Korea Institute of Economic Research (KERI), recently told Yonhap News Agency that Korean companies have increased production in China due to rising labor costs and the recent disadvantages of foreign-affiliated companies. He said it had shrunk. .. He said South Korea needs to reduce its dependence on China to address the structural risks of exports.

The Korea Times also suggested in its editorial that Korean companies develop concrete means to reduce their excessive reliance on the Chinese market.

“Korea needs to diversify its import sources of raw materials and parts while exploring export markets around the world,” he said.

In a Chinese version of the Epoch Times, political commentator Lu Tianming said South Korea’s economy is too dependent on China, and South Korea needs to diversify its risks and reduce its dependence on China in terms of both supply and demand. rice field.

Mr Lou said the most obvious example of excessive dependence on China is in South Korean imports.

“Some products will be significantly affected if China cuts supply, such as the previous AdBlue and ice melt liquids,” he said. “But even without a supply cutoff, inflation and rising prices in China will have an impact. [South] South Korea, many people [South] South Korea’s raw materials and semi-finished products are heavily dependent on China, and the types and proportions of products imported from China are very large. “

In addition, South Korea is an export that is highly dependent on China. According to Lu, about 25% make up a very large proportion, and these shortcomings are now appearing.

He said the South had no choice but to open up export markets elsewhere.

“This dependence is very high. As the saying goes, it is very dangerous to put all the eggs in one basket. Therefore, in order to reduce this dependence on China, the supply side and the demand side It is essential to diversify the risk in both [South] Long-term development of South Korea. “

Lu also said that relying on unethical and fraudulent Communist Party governments such as the Chinese Communist Party (CCP) is an additional risk to South Korea.

As tensions between China and the United States increase and the two countries vie for South Korea, the Chinese administration will take advantage of South Korea’s economic dependence and threaten the countries it is already doing, Mr. Lou said.

China’s economy facing “the most difficult times”

Last December, Chinese officials publicly admitted that the Chinese economy was in a very serious recession.

At the end of 2021, China’s finance minister, Liu Kun, issued a rare official statement stating, “I want to put into practice the goal of living a more constrained life.”

The CCP acknowledges at its annual Central Economic Working Conference on December 8-10 that China’s economic development is facing triple pressure from shrinking demand, supply shocks and weak expectations. I did.

In a speech in early December, Professor Li Daokui of the Faculty of Social Sciences at Tsinghua University said that in the next few years, China’s economy could be the “most difficult time” compared to the last 40 years.

Jessica Mao

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Jessica Mao is a writer of The Epoch Times, focusing on topics related to China. She started writing her Chinese version in 2009.