By Choi Sung-jin
A 1 percentage point fall in the growth rate of China's domestic market would shave an estimated 0.22 of a percentage point off Korea's gross domestic product growth, a state think tank said Thursday.
Among industries, computer and electronic equipment will likely be hit hardest, the Korea Development Institute said in a report.
Overall, China's domestic market accounts for nearly 20 percent of Korea's economic growth rate, recording an increase of more than seven times in its influence on the Korean economy over the past two decades or so, the KDI report said.
According to the report, titled "Structural changes in the Chinese economy and their effects on Korea's industrial growth," 1 percent growth in China's domestic demand leads to a 0.066 percent increase in Korea's GDP, as of 2014, more than seven times the comparable rate of 0.009 percent in 1995.
The Chinese market's influence on Korean industries has expanded particularly sharply in durable goods, including automobiles, refrigerators and machine equipment with a service life of one year or longer. As a result, if China's demand for these goods increases 1 percent, Korea's GDP is estimated to grow 0.034 of a percentage point, 11 times the 0.003 of a percentage point in 1995.
In 2014, China's domestic demand grew 7 percent, on average, which was estimated to push up Korea's GDP growth rate by 0.61 of a percentage point. Given that Korea's real growth rate was 3.3 percent in that year, the increase in China's domestic demand accounted for 18.5 percent of Korea's economic growth.
If China's domestic demand increase slows to 6 percent, it is estimated to pare down Korea's GDP growth rate by 0.39 of a percentage point, the report said.
By industry, computer and electronic equipment would be hit most severely, suffering a 1.02 percentage point drop in GDP. Also affected adversely would be machinery, metals and automobiles, recording an estimated GDP decline of 0.29-0.44 of a percentage point.
"Concerns are mounting about Korea's declining exports to China but there have been few attempts to look underneath the ostensible trends," said Chung Sung-hoon, a KDI fellow. "What's needed is the understanding of structural changes in China's economy and to help Korean businesses cope with them by providing sufficient incentives."
A 1 percentage point fall in the growth rate of China's domestic market would shave an estimated 0.22 of a percentage point off Korea's gross domestic product growth, a state think tank said Thursday.
Among industries, computer and electronic equipment will likely be hit hardest, the Korea Development Institute said in a report.
Overall, China's domestic market accounts for nearly 20 percent of Korea's economic growth rate, recording an increase of more than seven times in its influence on the Korean economy over the past two decades or so, the KDI report said.
According to the report, titled "Structural changes in the Chinese economy and their effects on Korea's industrial growth," 1 percent growth in China's domestic demand leads to a 0.066 percent increase in Korea's GDP, as of 2014, more than seven times the comparable rate of 0.009 percent in 1995.
The Chinese market's influence on Korean industries has expanded particularly sharply in durable goods, including automobiles, refrigerators and machine equipment with a service life of one year or longer. As a result, if China's demand for these goods increases 1 percent, Korea's GDP is estimated to grow 0.034 of a percentage point, 11 times the 0.003 of a percentage point in 1995.
In 2014, China's domestic demand grew 7 percent, on average, which was estimated to push up Korea's GDP growth rate by 0.61 of a percentage point. Given that Korea's real growth rate was 3.3 percent in that year, the increase in China's domestic demand accounted for 18.5 percent of Korea's economic growth.
If China's domestic demand increase slows to 6 percent, it is estimated to pare down Korea's GDP growth rate by 0.39 of a percentage point, the report said.
By industry, computer and electronic equipment would be hit most severely, suffering a 1.02 percentage point drop in GDP. Also affected adversely would be machinery, metals and automobiles, recording an estimated GDP decline of 0.29-0.44 of a percentage point.
"Concerns are mounting about Korea's declining exports to China but there have been few attempts to look underneath the ostensible trends," said Chung Sung-hoon, a KDI fellow. "What's needed is the understanding of structural changes in China's economy and to help Korean businesses cope with them by providing sufficient incentives."
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