Korea is more dependent on trade with China than ever, which could aggravate concerns over the prolonged slowdown in its exports as China’s economic growth slows.
According to Statistics Korea, trade volume with China accounted for 23.2 percent of South Korea’s total trade for the first nine months of the year, up 1.8 percentage points over the same period last year.
Korea’s trade with the world’s largest economy by purchasing power came to 168.8 billion won ($148.9 million) during the January-September period, while it posted 727.6 billion won in combined exports and imports with trade partners worldwide.
Further, exports to China accounted for more than a quarter ― 25.7 percent ― of the total, up from 25 percent last year.
When the two countries made diplomatic ties in 1992, the share of Korea’s exports to China was a measly 3.5 percent. In 2003, with a share of 18.1 percent China overtook the U.S. (17.7 percent) to become the nation’s biggest export destination.
“China has played a significant role to propel Korea’s exports over the past few years. But with the country’s growth showing signs of slowing down, it could pose new challenges,” a local analyst said.
Meanwhile, the Bank of Korea downplayed the chance of a hard landing for China’s economy.
But the central also shared the view that its slowdown would have a negative impact on Korea’s exports down the road.
In a report to the National Assembly, the BOK said volatilities in the global financial market would continue to increase for some time due to uncertainties related to its No. 1 trading partner.
This is because a slowdown in China’s economy will lead to greater concerns over a global deflation as the Chinese economy already contributes greatly to the growth of the global economy, while the growth momentum of the world economy has significantly weakened, the report said.
“Its slowing GDP growth will especially lead to greater concerns over economic downturns in Asia’s newly emerging market countries that are closely linked to the Chinese economy,” it said.
South Korea logged the sixth-most outbound shipments accounting for 3.1 percent of total world exports in 2014.
The nation ranked No. 8 in trade volume with $1.09 trillion last year. It accounted for 2.9 percent of the world’s total trade.
By Kim Yon-se (kys@heraldcorp.com)
