S.Korea's growing exports to US shouldn't affect its trade with China
Published: Jun 11, 2024 07:16 PM
Illustration: Chen Xia/GT

Illustration: Chen Xia/GT

South Korea's exports to the US surpassed those to China in the first five months of 2024, according to South Korea's official data. If the trend continues, the US could become the top export destination for South Korea for the first time in 22 years, the Yonhap News Agency claimed on Monday.

According to Yonhap, China continued to be South Korea's largest export destination in 2023, the gap between South Korea's exports to China and those to the US narrowed to the smallest level in 19 years.

Moreover, according to the Korea International Trade Association, in 2023, China's imports from South Korea amounted to $162.5 billion, a sharp decrease of 18.8 percent compared with the previous year. This also led to a deficit of $18 billion for South Korea in its trade with China, the first deficit in the 31 years since the establishment of diplomatic relations.

The ongoing changes in South Korea's trade with China and the US are noteworthy, as they are not just the result of economic and market factors. The decline in South Korea's exports to China is evidently also due to policy factors and political interference by external forces.

Admittedly, the trade structure between China and South Korea has changed in recent years. With the acceleration of China's industrial upgrading, South Korea's advantageous industries such as electronics, machinery and vehicles have seen a decrease in competitiveness in the Chinese market.

However, what deserves more attention is the interference of geopolitical factors. Under US policies promoting industrial reshoring and technological suppression against China, two major South Korean industries - semiconductors and vehicles - have seen significant pressure from the US and are facing difficult choices. For the memory chip industry, which is a major South Korean exporter, the combination of geopolitical factors and the industry cycle has led to a continuous decline in exports to China, becoming a direct cause of the trade deficit with China.

Increased exports to the US are beneficial to the South Korean economy, but this should not in any way affect the normal growth momentum of mutually beneficial economic and trade cooperation between China and South Korea. Maintaining good economic and trade cooperation with China is equally, if not more, beneficial and extraordinarily important to the South Korean economy.

For a long time, China has been South Korea's largest source of trade surplus. China remains South Korea's largest economic and trade partner, with the proportion of bilateral trade between China and South Korea accounting for almost 22.6 percent of South Korea's overall trade. Economic and trade relations with China still can't be replaced by South Korea's relations with the US. The potential for further growth in China-South Korea economic and trade relations is still enormous.

For a developed economy like South Korea that heavily relies on overseas markets, it is more advantageous to capitalize on development opportunities in China. China's vast domestic market is unparalleled and cannot be replaced for the foreseeable future. 

In 2023, China imported more than 5 trillion-yuan ($690 billion) worth of commodities, nearly 3 trillion yuan of electronic components and close to 2 trillion yuan of consumer goods, presenting significant business prospects for companies worldwide.

For South Korean exporters, it is more rational to continue focusing on the Chinese market and develop more competitive products to thrive in the evolving market landscape. This strategic approach will support their sustained expansion and success.

South Korea also needs to realize soberly that its rapid export growth to the US is partly due to a sharp increase in South Korean exports of automobiles. However, the US has enacted legislations to promote the reshoring of the automotive industry chain, which is likely to have a negative impact on South Korea's exports of automobiles to the US. The possibility of trade friction between the US and South Korea is also increasing.

Industrial chain cooperation between China and South Korea is deeply intertwined, with a solid foundation and huge potential. Both sides should work together to explore new areas, broaden cooperation, and resist politicizing economic and trade issues. 

China recently expressed its willingness to accelerate the second stage negotiations of the China-South Korea Free Trade Agreement on the basis of a practical balance, deepen the construction of the China-ROK (Changchun) International Cooperation Demonstration Zone, and strengthen cooperation in high-end manufacturing, new energy, artificial intelligence, biomedicine and other fields with South Korea.

South Korea should actively join hands with China to enhance mutually beneficial economic and trade cooperation, while also safeguarding against any potential disruptions to bilateral trade caused by policy factors or external political interference.

The author is a reporter with the Global Times.