China falls, US rises as Korea's export destinations

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By Anna J. Park

Data show that the U.S. is increasing its weight in Korea's annual export volumes, while China has been declining. China's prolonged pandemic lockdowns are attributed as one of the main reasons, yet other complex factors, such as China's advances in manufacturing industries as well as the growing U.S-China trade conflict, are also estimated to have played a part in the trend.

According to data compiled by the Korea International Trade Association (KITA), exports to China accounted for about 23.2 percent of Korea's entire export volume during the first half of this year. The figure is a decrease by 1.9 percentage points from the same period last year. In comparison, the U.S. took up 15.7 percent of Korea's export volume during this year's first half, which is a 0.4 percentage point increase year-on-year.

When looking at last year's numbers, China accounted for 25.3 percent, or $162 billion out of Korea's annual export volume of $644 billion, which is a fall of 0.6 percentage points from 2020. During the same period, the weight of exports to the U.S. stood at 14.9 percent, which was a year-on-year increase of 0.4 percentage points.

The trend is more evident in a longer time frame of three years from 2018 to 2021. China's weight in Korea's annual exports fell to 25.3 percent from 26.8 percent during the three years, while the U.S.' weight rose to 14.9 percent from 12 percent. And this pattern ― China's decreasing proportion in Korea's exports and the increase of U.S.-bound Korean exports ― has become more evident during the first half of this year.

Market watchers say China's full-on lockdowns of major cities, including Shanghai and Beijing, during this year's spring time was an obvious factor that impacted the fall of China-bound Korean exports. But it doesn't explain the whole picture.

KITA's recent report shows China's changed policy direction to reduce high-tech imports, aiming to strengthen domestic manufacturing industries, was part of the key reason behind China's dwindled weight in Korea's exports over the years. In response to its intensified trade conflict with the U.S., China has been strengthening its supply chain linkage with Taiwan. As a result, Taiwan's outbound shipments to China in terms of state-of-the-arts items, such as semiconductors, have increased in recent years.

Because of both factors of Chinese cities' lockdowns and changed policy direction on high-tech imports, Korea's trade with China posted monthly deficits for two consecutive months of May and June. In May, the deficit stood at around $1.1 billion, followed by another $1.2 billion in June. It's the first time in 28 years that Korea recorded a monthly deficit when it comes to bilateral trade with China, and it's expected to log another deficit in July.

Given that Aug. 24 marks the 30th anniversary of Korea-China diplomatic relations, the government hopes to turn the tide again, by browsing various measures for strengthening economic cooperation with China. Foreign Minister Park Jin plans to visit China sometime around next month, while the trade ministry is known to be drawing up measures to recover outbound shipments to China.

“While Korea's export volume during the first half hit an all-time high, exports to China, the country's largest export destination, have slowed,” Trade Minister Lee Chang-yang said late last month.

“Commemorating the 30th anniversary of diplomatic ties with China, the government aims to support Korean companies' exports to China through a variety of measures, including strengthening export marketing strategies, intensifying economic cooperative partnerships with the country. The government is also planning to announce comprehensive measure to support exports during the next month.”