China runs Korea close in industrial competitiveness

By Choi Sung-jin

China’s industrial competiveness has risen sharply to reach Korea’s level, a state think tank warns.

The quality and technology of some Chinese industries, including steel, textiles and petrochemicals, are very close to Korea’s, and are even ahead in a few sectors, such as system semiconductors.

In a recent report, the Korea Institute for Industrial Economics and Trade (KIET) said the export setback of the nation’s major industries is due in large part to the global economic slump and competition with emerging economies, particularly challenges from China.

China’s price competitiveness is higher than Korea’s in most industries, the report said. In some industries, even the quality and technology of Chinese industries have followed right under Korea’s nose.

In the automobile, shipbuilding and general machinery sectors, which require high levels of technology, the quality and technology of the Chinese industries are still 75-85 percent of Korea’s. In some materials industries, including steel, textiles and petrochemicals, however, the Chinese products’ quality and technology have reached 95 percent of Korea’s.

Particularly in the petrochemical industry, there are almost no differences between the two countries, the report said.

China’s quality and technological levels have exceeded 90 percent of Korea’s in the home appliance and information-communication sectors, the two other areas in which Korea has enjoyed competitive advantages.

The world’s 11th-largest economy still maintains an edge over the second-largest economic power in oil refining and display panels, but competition between the two countries is expected to intensify in these areas, too, given the massive investment China has made in them recently, it said.

Korea is expected to be above China in the memory semiconductor industry five years from now, but Chinese makers are likely to make big inroads. In the system semiconductor sector, China’s technology is even 10 percent ahead of Korea’s. In LCD panels and OLED modules, Korea will have to stage fierce competition with China.

“After five years, Korea will be able to maintain a competitive advantage over China only in some high-end products and core parts and materials,” the KIET report said. “The demands for these products are quite limited, hardly able to replace the currently main products.”

The government-funded think tank called for careful analysis of the causes of the export slump, and countermeasures.

“Government and business officials need to differentiate their approaches in restructuring troubled industries,” the report said. “For instance, in dealing with the shipbuilding industry, which has few problems with competitiveness but is experiencing difficulties because of changes in global markets and poor management, the officials should take the global market’s recovery into account in restructuring it.”

In handling the steel, oil refining and petrochemical sectors that are experiencing the structural shrinkage of markets, the policymakers should adjust these industries’ production capacity and seek ways to transform them into new industries, the report said.