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Lights illuminate a port filled with shipping containers. (Getty Images Bank)

South Korea and China have already shifted from a complementary and coupled relationship to a competitive relationship in the area of exports, a new study finds. Furthermore, the two countries’ export values in each category last year show a clear decline in export coupling between the two countries.

According to a report titled “Analysis of Causes of Contraction of Exports to China,” which was released by the Korea Center for International Finance on Wednesday, Korea’s exports to the Chinese market decreased by 4.4% last year, even as China’s total exports rose by 7.0%.

Korea’s exports to China had grown by a yearly average of 6.5% between 2017 and 2021, while China’s total exports (an average rate of increase of 10.3%) were closely synchronized with Korea’s total exports (6.2%).

But China’s share of total Korean exports fell from 25.3% in 2021 to 22.8% last year, its lowest point in 14 years. When Hong Kong is included in the figures, China’s export share fell from 31.1% to 26.8%.

On an annual basis, Korean exports of semiconductors to China increased by 3.7%, but exports began declining in August, causing the rate of increase to plunge by 22.9% from 2021. (Semiconductors are Korea’s No. 1 export item to China exclusive of Hong Kong, accounting for 33.4% of total exports.)

Exports fell in 11 of the other 14 main export categories, with flat-panel displays’ share of total exports to China falling sharply from 18.8% in 2012 to 4.2% last year.

Korea accounted for a 7.5% share of China’s import market last year, which was the lowest since China joined the World Trade Organization in 2001.

Korea had overtaken Japan to control the largest slice of China’s import market between 2013 and 2020, but has been in second place, behind Taiwan, over the past two years. Korea’s market share has declined by 1.9 points over the past three years, even more than the US (-1.3 points), which is in an adversarial relationship with China.

In an empirical analysis of export data from the Korea International Trade Association, the Korea Center for International Finance found that when Chinese products exported to the global market increased by a unit of 1, Korea’s total exports and the estimated elasticity of Korean exports to China fell sharply from 0.622 and 0.907 in 2001–2015 to 0.378 and 0.377 in 2016–2022.

“In 2016, China launched its ‘Made in China 2025’ initiative with the objective of increasing domestic production through industrial advancement and the promotion of cutting-edge manufacturing. Since that time, the elasticity of Korean exports to China has declined and export coupling between the two countries has greatly weakened. In other words, Korean and Chinese exports have already converted from a complementary relationship to a competitive one,” the report said.

The center’s report noted that there was overlap between six of the 10 biggest export categories (in terms of value) in Korea and China last year and that those six categories accounted for a larger share of Korea’s total exports (83.2%) than of China’s (67.5%), suggesting that Korean companies have more to lose if they face off against Chinese companies.

When the Korea International Trade Association recently surveyed Korean exporters about their biggest competitor, 41.5% identified Chinese companies, while just 11.9% pointed to Japanese companies.

By Cho Kye-wan, staff reporter

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