China Market Up Korean Jobs Down
By Yoon Ja-young
Staff Reporter
China, which is rapidly making inroads to Korea's export markets, is threatening the job market here, an economist said.
Kim Dae-il, economics professor at Seoul National University, said in a report by Korea Development Institute (KDI) that China, a threatening competitor for the export-driven Korea, is undermining Korean exporters and slowing exports will negatively affect Korea's job market.
Kim admitted that the rise of China, which has recorded 9 percent annual economic growth on average, contributed a lot for Korea's trade expansion, providing a gigantic market in the vicinity.
Korea's export to China recorded $66 billion in 2004, growing over 18 times from 1988, and its import from China expanded 52 times to $32 billion. China took 27 percent of Korea's total export market in 2004, and 14 percent of Korea's import comes from China.
Despite the strengthening trade ties between the two countries, China's technology has advanced to the level that it could compete with Korea in diverse industries, and Korea's competitiveness in export is weakening, Kim pointed out.
He said Korea's trade surplus against China has expanded the employment of high skilled workers. However, China is likely to have a noticeable negative effect on Korea's labor market in the near future.
Kim said that China is eroding Korea's export market by 6.9 percent a year. The rapidly industrializing China rose as a main competitor in most of Korea's export items. In 1992, for example, China recorded over $500,000 exports in 86.5 percent of Korea's main export items that Korea recorded over the $1 million export mark. The ratio, surged to 96.3 percent in 2004.
China's main export items were textile, garments and shoes in 1992, but IT products took 24 percent of the country's export in 2003, Kim pointed out.
He said 1.17 million jobs would have been created if China's competitiveness over Korea remained at 1993 levels. He added that Korea's increasing foreign direct investment (FDI) in China is also likely to decrease employment here. China took only 2.2 percent of Korea's total direct investment overseas, but the ratio surged to 39.6 percent in 2004.
He cited a survey, in which 42.8 percent of manufacturers that advanced to China chose cheap labor as their motivation for the move. Moreover, over half of these firms are small-to-mid sized firms, main job creator for low skilled workers.
Kim said Korea should differentiate from China and switch to new industry. It should develop new sectors within the manufacturing industry by improving technology, and set up a basis to promote corporate investment. He urged the government of the need for reform, to promote investment in high value added service industries, such as education, medical, and financial services, which is likely to create decent jobs.