By Yoon Ja-young
Korea, increasingly dependent on China for exports, could be hit hard by a slowdown in the neighboring country.
According to Statistics Korea and the Ministry of Trade, Industry and Energy, the country’s exports to China this year totaled $102.1 billion as of September, accounting for 25.7 percent of the total.
The percentage of China’s total trade with Korea, including both exports and imports, also rose to 23.2 percent, up from 21.4 percent a year ago.
Korea’s exports to China have steadily been getting bigger since the two countries opened diplomatic relations in 1992 when trade with China stood at a mere 3.5 percent.
In 2003, trade with China overtook that with the United States, Korea’s long time biggest trading partner, and China has remained at the top of the list since then.
Exports to Japan, meanwhile, totaled $54.3 billion during the same period, with the ratio of total exports falling to 4.9 percent from 5.7 percent a year ago. In 1973 Japan accounted for 38.5 percent of Korea’s exports.
While exports to Japan and the EU were hit by the weak Japanese yen and euro, experts are concerned that Korea is depending too much on China, especially because the world’s second largest economy is beginning to slow down.
“Korea is one of the economies that will be most vulnerable to a hard-landing or recession in China,” said Lee Cheol-yong, an economist at LG Economic Research Institute.
He said that decreasing demand in China will have an impact five times bigger than a similar slowdown in the U.S. would have, as Korea is intertwined with China as a business partner much more than it is with the U.S.
Experts say that on top of diversifying destinations of exports, Korea should set up a new export strategy with China. Han Zae-zin, a senior research fellow at Hyundai Research Institute, pointed out that China is shifting its economic strategy from export to domestic consumption.
He said that Korea should seek to bolster tourism with the Chinese, including developing tailored packages to attract more Chinese tourists. Korea has been seeing an upswing in tourism from China, with over 6 million Chinese visiting Korea last year.
“Korea should also make use of the economic cooperative measures between the two countries, such as the Korea-China free trade agreement (FTA) and the Asia Infrastructure Investment Bank (AIIB),” he said, adding that the benefits from these should be maximized to lessen the loss from an economic slowdown in China.