South Korea’s exports to trade partners other than China are increasing, indicating that market diversification is underway due to a slump in shipments to China, according to a report published by the Korea International Trade Association (KITA) on Monday.

“Exports to China have been affected because it has been trying to become more self-reliant and caused an increase in imports from China,” the KITA said in its recent analysis of the nation’s exports trends.

According to the report, Korea’s dependence on exports to China has steadily declined to 22.8 percent last year from 26.8 percent in 2018. In the first quarter this year, it fell to 19.5 percent.

China’s export self-reliance in the display sector, for example, rose to 0.899 in 2022 from negative 0.137 in 2015. The figure for batteries rose to 0.931 from 0.595 and that for cars increased to 0.619 parts from 0.421 over the same period. Export self-reliance is calculated by deducting the intermediate imports by item divided by exports by item from one. A figure closer to one indicates higher self-reliance.

The mutually complementary structure between the two countries has also weakened, where Korea would supply high-tech intermediate components, while China would assemble them and the finished products would be sold on global markets.

The Korea-China intra-industry trade index rose to 0.968 in the first quarter this year, from 0.668 in 2018. Intra-industry trade refers to the simultaneous import and export of similar goods within the same industrial sector. The closer the index is to 1, the more active intra-industry trade is.

In the meantime, Korea’s export growth to other countries outpaced those to China, indicating that Korean companies are diversifying their export destinations, according to the KITA.

“The recent deterioration in the trade balance is largely due to a decline in exports, particularly to China, rather than an increase in imports,” said Cho Eui-yun, a KITA researcher. “There is a growing significance for exporters to develop other markets to respond to a prolonged slump in China shipments.”

Korea’s exports to China fell by 4.4 percent last year, but exports to markets elsewhere grew by 9.6 percent. In the first quarter this year, exports to China plunged by 29.8 percent, but shipments to markets excluding China fell by only 6.8 percent.

Industries such as petroleum products, petrochemicals, steel, auto parts, display panels and batteries have expanded their export markets outside of China. Korea’s exports to the U.S., in particular, grew to account for 3.59 percent of all U.S. imports in the first quarter, the highest share for Korea since 3.73 percent seen in 1990.

Exports to India were strong in industries like petrochemicals, steel, display panels, batteries and plastic products. Shipments of auto parts and display panels were high to Vietnam. Exports to Australia grew by 8.8 percent in the first quarter, the highest growth among the top 10 export destinations, mostly driven by petroleum products.

By Pulse

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