Korea must build a seawall against tsunami from west
Local economic experts used to say if the U.S. economy sneezes, Korea catches a cold. They agree now if the Chinese economy coughs, Korea gets pneumonia, indicating this country's undue dependency on its giant neighbor and the world's second-largest economy.
It was small surprise then that the latest free fall of China's stock market has startled not just stock investors but exporters and economic policymakers here.
Of course the crash of the Chinese bourse, which took away 30 percent of its paper value in just one month, is basically the concern of Chinese investors, especially recent participants: the equity market accounts for relatively small portion of China's economy yet and the communist country's financial market is largely closed for foreigners.
Yet local executives and bureaucrats have to pay keen attention to what's going on across the West Sea at least for two reasons.
First, the recent market tumble and Beijing's failure ― or partial success ― to prop it revealed the limitations of both the communist technocrats' ability and authority. Second, China's stock market on a rollercoaster may be the mirror of its real economy in months, or years, to come.
The recent collapse of the equity market has dealt stinging blows to Beijing in various ways. It not only dashed cold water on officials' wishes for revitalizing direct financing for China's industry and fattening the pockets of its citizens but humiliated the technocrats by largely defying their desperate efforts to intervene in the market. At the end of the day, officials failed to both recuperate the market and lost their faces ― and trust ― among investors, domestic and international.
It also heralds the difficulties facing China in its eventual transition from government-dictated economic system toward one increasingly dependent on free market principles. The most immediate concern for China and the rest of the world, especially Korea, is its notably slowing growth tempo. Beijing says the Chinese economy grew 7.4 percent last year but not many believe it thinking actual growth rate may be in mid-5 percent range with some foreign watchers, including the New York Times, raising suspicions about statistical manipulation by officials.
China's troubles can't come at a worse time for Korea, which itself is reeling from a number of adverse factors, including slowing export and weak growth engine. Korea relies on China for 26 percent of its export, compared with 12.8 percent for the United States. If Chinese Prime Minister Li Keqiang's economic strategy ― which calls for shifting from export-driven growth to bolstering domestic demand and structural reform ― fails as symbolized by the stock market bust, and pushes Beijing back to export-oriented growth, Korea's struggling exporters will face a far steeper uphill battle.
The complete ''decoupling" of the Korean and Chinese economies will be neither desirable nor possible. Yet Korea must prepare all steps available to minimize financial and economic effects possible turmoil in Chinese economy will have on its own by, for instance, diversifying export destinations and speeding up industrial restructuring.
In economy, as in national security, nothing is riskier than putting most of the eggs in one basket.
Local economic experts used to say if the U.S. economy sneezes, Korea catches a cold. They agree now if the Chinese economy coughs, Korea gets pneumonia, indicating this country's undue dependency on its giant neighbor and the world's second-largest economy.
It was small surprise then that the latest free fall of China's stock market has startled not just stock investors but exporters and economic policymakers here.
Of course the crash of the Chinese bourse, which took away 30 percent of its paper value in just one month, is basically the concern of Chinese investors, especially recent participants: the equity market accounts for relatively small portion of China's economy yet and the communist country's financial market is largely closed for foreigners.
Yet local executives and bureaucrats have to pay keen attention to what's going on across the West Sea at least for two reasons.
First, the recent market tumble and Beijing's failure ― or partial success ― to prop it revealed the limitations of both the communist technocrats' ability and authority. Second, China's stock market on a rollercoaster may be the mirror of its real economy in months, or years, to come.
The recent collapse of the equity market has dealt stinging blows to Beijing in various ways. It not only dashed cold water on officials' wishes for revitalizing direct financing for China's industry and fattening the pockets of its citizens but humiliated the technocrats by largely defying their desperate efforts to intervene in the market. At the end of the day, officials failed to both recuperate the market and lost their faces ― and trust ― among investors, domestic and international.
It also heralds the difficulties facing China in its eventual transition from government-dictated economic system toward one increasingly dependent on free market principles. The most immediate concern for China and the rest of the world, especially Korea, is its notably slowing growth tempo. Beijing says the Chinese economy grew 7.4 percent last year but not many believe it thinking actual growth rate may be in mid-5 percent range with some foreign watchers, including the New York Times, raising suspicions about statistical manipulation by officials.
China's troubles can't come at a worse time for Korea, which itself is reeling from a number of adverse factors, including slowing export and weak growth engine. Korea relies on China for 26 percent of its export, compared with 12.8 percent for the United States. If Chinese Prime Minister Li Keqiang's economic strategy ― which calls for shifting from export-driven growth to bolstering domestic demand and structural reform ― fails as symbolized by the stock market bust, and pushes Beijing back to export-oriented growth, Korea's struggling exporters will face a far steeper uphill battle.
The complete ''decoupling" of the Korean and Chinese economies will be neither desirable nor possible. Yet Korea must prepare all steps available to minimize financial and economic effects possible turmoil in Chinese economy will have on its own by, for instance, diversifying export destinations and speeding up industrial restructuring.
In economy, as in national security, nothing is riskier than putting most of the eggs in one basket.
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