Reducing trade with China, US represents just wishful thinking for South Korea

By Wang Jiamei Source:Global Times Published: 2017/10/15 19:13:40

A senior South Korean official said last week that the country should reduce its trade reliance on the US and China, but that idea doesn't seem to be feasible in the real world.

Finance Minister Kim Dong-yeon said on Thursday that geopolitical factors and economic friction with its top trading partners had underscored the need to diversify its partners. South Korea is encouraging its companies to expand business ties with India as well as Southeast Asian and Latin American countries.

It is true that South Korea has been facing headwinds in foreign trade. For instance, the US and South Korea are undergoing a tough renegotiation of a bilateral free-trade agreement that US President Donald Trump has been critical of, given the latter's trade surplus of $17 billion with the US in 2016.

Yet, it seems naive for a country to reduce trade with its two largest export destinations simply because of temporary difficulties, which are common in global trade.

In 2016, South Korea's exports to China and the US reached $124.4 billion and $66.8 billion, respectively, accounting for 25.1 percent and 13.5 percent of its shipments overseas. It is hard to imagine that the country can find another market as big as China and the US combined.

South Korean products such as integrated circuits have become an indispensable part of the industrial manufacturing chain in China and the US, and that situation is unlikely to see any change in the short term. For instance, as China is the world's largest manufacturer of laptops, smartphones and many other electronics devices, it has always had a huge demand for integrated circuits, which are the top export item of South Korea.

According to data from South Korea's customs, its exports of electronics and machinery products to China reached $32.52 billion in the first half of this year, up 16.4 percent year-on-year.

In addition, bilateral investment between China and South Korea has developed rapidly. At the end of August, Samsung announced it would build the second phase of its memory chip plant in Xi'an, Shaanxi Province, with an investment of $7 billion in the coming three years.

In the first half of 2016, investment by South Korean companies in China rose 17.8 percent year-on-year to $2.84 billion, according to data from the Beijing branch of the Korea International Trade Association.

Objective facts and complementary economies have made China into the top trading partner of South Korea. Both sides should utilize the benefits of their free trade agreement to deepen cooperation.

Reckless talk about trade ties is irresponsible, and it is also misleading for South Korean companies as they plan their futures.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn



Posted in: EYE ON THE ECONOMY

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