By Yoon Ja-young
Staff Reporter
China has been the sustaining pillar for Korea's exports but might not be this year. The KDB Research Institute estimated Tuesday that the country's exports to China would decrease by 30 percent this year in the worst-case scenario.
The economic think tank, under the state-run Korea Development Bank (KDB), said that China's imports have been plunging since last October. It estimated China's imports would drop by 10 percent and exports by 5 percent this year. Some pessimistic estimates report that both exports and imports could drop by over 20 percent.
With total imports shrinking, Korea's slice of the pie is also expected to dwindle. The institute said that if China's imports drop by 9 percent, Korea's exports to China would decrease by 15 percent. The nation's trade account would then record a $7.4 billion surplus, a fall to half of last year's amount.
In a more pessimistic scenario in which China sees imports fall by 25 percent, Korea would have exports to China drop by 30 percent, and the trade account surplus would be only $2.5 billion, dealing a seriously blow to the Korean economy.
The institute said that weakening Korean parts and material producers in China have worsened the situation. Korea owed much of its trade surplus to China to these exporters but their portion of trade is dropping at a rapid pace.
The portion of parts and materials imported to Korea from China, meanwhile, surged to 54 percent last year from 50 percent the previous year.
It pointed out that the business pattern has changed. Now, instead of exporting goods made in Korea, an increasing number of businesses set up factories in China and export the finished goods to Korea.
``Given the chain reaction of global demand falling, China's trade and Korea's exports to China aren't likely to improve in the near future,'' said Park Seok, an analyst at the institute.