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China is expected to replace Japan as South Korea's number one importer this year on the strength of surging demand for steel and electronic parts, a report said Thursday.

The estimate, based on numbers tallied for the first half of this year, showed Chinese imports surging 36.3 percent annually to US$28.7 billion, the Ministry of Commerce, Industry and Energy said in the report.

Imports from Japan, South Korea's main supplier of goods in the past, rose 10.4 percent to $26.5 billion.

China has been South Korea's No. 1 export destination since 2003.

Chinese goods made up 17.6 percent of all South Korean imports that reached $163.1 billion through June, while Japan accounted for 16.3 percent. For the first half of last year, Japanese imports made up 17.1 percent of the total, while those from China stood at 15.0 percent.

Ministry officials said that unless there is a sudden change in trade conditions, Chinese imports of Korean goods and services will surpass those from Japan by the end of this year.

"Even last year imports from China soared to just under $48.6 billion, or about $3.3 billion shy of $51.9 billion worth of South Korean imports from Japan," said a ministry official.

He said Chinese imports have made across-the-board gains in areas like steel, electronic parts, textiles and consumer electronics. Steel imports almost doubled, as South Korean mills were unable to meet demand by shipbuilders, carmakers and construction companies. Imports of electronic parts were up about 60 percent as many local manufacturers took advantage of cheap Chinese components.

The official said main reasons for the gain is the global price competitiveness of Chinese products plus resurgence of the South Korean economy.

South Korea's domestic consumption grew 4.1 percent year-on-year in the first quarter while exports jumped 14.7 percent up till June, compared to the same period in 2006.

In addition, many local firms had relocated their manufacturing base to China in the past decade whose cheap products are shipped back to South Korea, officials said.

Imports from Japan made steady gains in areas like manufacturing machines and other capital goods, but their growth rate trailed behind those of Chinese products.

The ministry said China remained South Korea's foremost export market, with $36.2 billion worth of goods shipped there in the first half versus $12.2 billion to Japan. The European Union and the United States were South Korea's second and third largest market in the six month period.

South Korea, meanwhile, expects to surpass its annual export target of $360 billion by year's end, with imports estimated to top $343 billion.
SEOUL, July 5 (Yonhap News)