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| Containers are stacked for exports in the port of Busan, Aug. 2. Yonhap |
By Lee Min-hyung
The ongoing confrontation between Washington and Beijing over various issues is affecting South Korea's long-time economic relations with China with analysts saying Seoul is considering rolling back its reliance on Beijing in terms of export volume.
Given their geopolitical proximity, and China accounting for around a quarter of Korea's annual exports in 2019, Seoul and Beijing have been developing deep trade and investment ties in recent decades. However, Korea is showing signs of economic decoupling from China, as Asia's fourth-largest economy is expected to reduce its export reliance on the long-time trade partner in a post-coronavirus world, analysts said Tuesday
"Korea's exports have entered a super-cycle, but it is showing a different pattern in that this is driven by developed nations ― such as the U.S. ― unlike ones in the past when China drove Korea's export super-cycles," Park Sang-hyun, an economist at a securities firm, said. This means China's economic doldrums or financial market instability will have a limited impact on the Korean economy, he added.
Even if the South Korean economy remains somewhat dependent on exports to China, chances are this will not be as strong as before, as the U.S. will continue to tighten its grip on global supply chains and Seoul is expected to expand the portion of its exports to Western countries, according to park.
Data released by Hi Investment & Securities showed that the portion of Korea's exports to the United States and European Union countries reached 21.2 percent on average between 2010 and 2017.
But the figure has begun increasing at a rapid pace due to the pandemic ― it went up by 3.2 percentage points to 24.4 percent between January 2020 and July 2021. Analysts claim the bilateral "economic decoupling" will continue to weaken due to the global economic paradigm shift induced by the pandemic.
New large-cap Korean companies have also arisen whose Chinese reliance is not as huge as firms in the KOSPI's top-ten category a decade ago.
In 2010, manufacturing players such as POSCO, Hyundai Motor and Hyundai Mobis were among the nation's top-five companies by market capitalization; but now online platform giants including Naver and Kakao are rapidly expanding their presence and replaced the manufacturing firms on the list in 2021.
"Platform or secondary battery companies have risen to the list of KOSPI's top-ten companies, and this can be interpreted as a sign of Korean firms' reduced reliance on China," the analyst said. "This implies that the Korean economy and local stock markets will be less exposed to any China risks than before."
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