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(provided by Yonhap News)

The short-term impact of the recent slowdown in China’s economic growth on South Korean exports will not be large, a Bank of Korea (BOK) analysis predicted.

South Korea’s reliance on China as an export market remains stable, and its export items are still highly competitive, the analysis noted.

The BOK published an issue note report titled “Structural Characteristics of Exports to China and Their Implications” on Wednesday.

“While some negative impact on South Korean exports to China will be unavoidable in the short term if China’s rate of economic growth slows, it is predicted that robust trends in global semiconductor demand and Chinese exports will offset those negative effects,” the report noted.

The BOK observed that the characteristics of South Korean exports to China today are different from those of the past. Exports to China rose sharply in the period before the global financial crisis of 2008, but have maintained a modest rate of increase since 2010.

Annual exports to China total around US$140 billion, hovering around 25% of all South Korean exports. This suggests that South Korea’s reliance on China as an export market has remained stable without any major rise.

In the report, the BOK said, “South Korean and overseas global businesses have been turning to Southeast Asia in increasingly large numbers with the weakening of China’s comparative advantage as a production base due to low wages and an abundant workforce, and Chinese import demand for South Korean products has shown a weakening trend as China’s self-sufficiency has increased.”

The BOK also concluded that the structure of exports to China is increasingly shifting toward items where South Korea holds a competitive advantage over China — namely semiconductors, petrochemicals, machinery and steel.

In terms of operation stages, most of the exports involve intermediate goods, which are used by China to produce final goods for export. Despite progress in advancing its industry structure, China still relies on South Korean imports for high-tech components that are used to produce final and intermediate goods.

On this basis, the BOK observed that while exports to China are closely tied to global semiconductor demand and Chinese exports and investment, their correlation with Chinese consumption is relatively low.

The report forecasted, “The robust trends in global semiconductor demand and Chinese exports, which are closely related to South Korea’s exports to China, appear likely to mitigate the negative impact from the slowdown in Chinese domestic demand.”

It also said, “In the intermediate to long term, exports to China are unlikely to show the same trend of growth as they have in the past.”

By Jun Seul-gi, staff reporter

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