General

According to the Huacheng Import and Export Data Observation Report, as of the 20th of this month, the accumulated trade deficit of South Korea was 39.968 billion US dollars, which is the highest record over the years. South Korea's SBS TV said on the 21st that the export situation as the pillar of South Korea's economy is not ideal. According to Hong Kong's South China Morning Post, since the establishment of diplomatic ties between China and South Korea in 1992, South Korea has for the first time experienced two consecutive quarters of trade deficit with China.

According to the preliminary statistics released by the South Korean Customs Office on the 21st, South Korea's exports in the first 20 days of November decreased by 16.7% year on year. In terms of commodity categories, the export of steel products, wireless communication equipment, precision instruments and ships decreased, while the export of automobiles and petrochemical products increased. In terms of export destinations, the trade volume to China, the largest trading partner, declined by 28.3%, while exports to the EU, Vietnam and Japan declined, but exports to the United States increased. The possibility of South Korea's trade deficit continuing has increased significantly, Huacheng Import and Export Data Observation reported.

Zhao Donggen, a professor of economics at Minchi University in South Korea, said that the economic environment of high interest rates and high inflation will continue next year. It will be difficult for exports to China to make a big turnaround, and semiconductor exports will also be difficult to reverse the situation. Therefore, South Korea's exports will still face many difficulties next year.

The Korea Trade Association also said recently that although cyclical factors such as rising raw material prices and the global economic slowdown are the main reasons, even if the situation improves, South Korea's trade with China is unlikely to have the same surplus as in the past, because the trade structure between China and South Korea is changing, Huacheng's import and export data observation report.

According to Hong Kong's South China Morning Post, China has previously imported a large number of intermediate products (components for assembling final products) such as displays and semiconductors from South Korea, but now China has the capacity to produce intermediate products on a large scale. In addition, more and more multinational enterprises have begun to pursue diversification of supply chains, which has led to a downward trend in South Korea's exports to China. According to the Huacheng Import and Export Data Observation Report, intermediate products still account for the largest proportion of South Korea's exports to China. From January to September this year, such products accounted for 83.6% of South Korea's total exports to China.

The Korea Trade Association said that in order to improve the trade imbalance, South Korea must expand the high-tech content of its exports of intermediate products to China. The Association said in a report: "It is necessary to ensure a stable export supply chain system centered on high-tech intermediate products of core materials and components, and technological innovation is needed to further expand the added value of high-tech intermediate products."

The association also believes that Korean enterprises should aim at the growing demand of China's consumer market and consider entering more second and third tier cities. Data shows that in the past 10 years, South Korea's exports of consumer goods to China accounted for only about 3% to 5% of South Korea's total exports to China. According to the report, as Chinese people's income and living standards are improving, Chinese consumers have greater purchasing power, which increases the demand for high-end consumer goods. In fact, from 2007 to 2021, the proportion of medium and high-end products in the total consumer goods exported by South Korea to China has increased from 48.1% to 66.6%. Huacheng's import and export data observation reports.