S.Korea urged to 'carefully' handle ties with China as deficit raises alarm
Published: Aug 04, 2022 11:32 PM
Photo: VCG

Photo: VCG

South Korea's rarely seen trade deficit with China for three consecutive months may have resulted from a mix of external factors, including currency fluctuations and the impact of the coronavirus, Chinese analysts said, while warning that the deficit also indicated a loss of an edge for some of South Korean products in the very competitive Chinese market. 

Observers suggested that on the one hand, South Korea's industry giants should actively adjust their old market strategies as the world's second-largest economy is growing both in terms of technology and volume; on the other hand, the South Korean government has to carefully handle its relations with China and the US, and treasure the vast market in China, its biggest trade partner in the world. 

South Korea's trade with China has been in deficit for three consecutive months for the first time since 1992. 

Exports to China, South Korea's biggest trading partner, shrank 2.5 percent from a year earlier to $13.24 billion in July. South Korea's deficit with China came to $570 million in July, staying in the red for three straight months, according to the South Korean Ministry of Trade, Industry and Energy.

Following the data release, there are growing concerns about whether South Korea's export competitiveness in China is fundamentally declining, with China's technological development and the nurturing of its home-centered domestic demand market, according to a report from The Korea Economic Daily on Tuesday.

South Korean firms have to do better research on the changing Chinese market - which is experiencing a consumption upgrading and rising homegrown competitors - to keep their market shares, Zhong Feiteng, a research fellow on the Asia-Pacific and global strategy at the Chinese Academy of Social Sciences, told the Global Times on Thursday.

According to the Korea Economic Daily report, from July 1 to July 25, exports of auto parts to China decreased by 24.9 percent, petrochemicals fell by 14.1 percent, and wireless communications were down by 13 percent.

Zhong also urged the South Korean government to better balance the relationship between China and the US, especially when the latter has been seeking to establish a small circle, luring South Korea to join, to exclude China from the global chip industry chain.

Only South Korea's exports of semiconductors to China increased by 10.9 percent in value between July 1 and 25, maintaining a strong growth momentum, while other exports of other products stagnated or decreased. 

"Deteriorating China-South Korea bilateral ties will inevitably hurt their trade connections," Zhong said, calling for South Korea to treasure the China market. 

South Korea's total exports last month were $60.7 billion, up 9.4 percent year-on-year; imports were $65.37 billion, up 21.8 percent year-on-year. Although exports hit an all-time high in July, it posted a deficit of $4.67 billion as imports surged, government data showed.

It marked the first time since 2008 that the country's trade balance stayed in the red for four straight months.

Global Times