[Reporter’s notebook] Korea needs to “de-risk” its ties with China more than anyone

Posted on : 2023-05-30 17:02 KST Modified on : 2023-05-30 17:02 KST
With exports to China down a staggering 27.7%, Korea desperately needs to adopt a new strategy if it hopes to avoid confrontation with China
President Joe Biden of the US speaks at a state dinner for President Yoon Suk-yeol of South Korea at the White house on April 23. (AP/Yonhap)
President Joe Biden of the US speaks at a state dinner for President Yoon Suk-yeol of South Korea at the White house on April 23. (AP/Yonhap)

-27.7% and -2%.

These figures represent the respective year-on-year export growth rates of South Korea and the United States to China from January to April of this year, according to China’s General Administration of Customs. During this period, South Korea\'s exports to China decreased by a staggering 27.7% when compared to the same period last year, making it the country with the largest decline among the 27 countries and regions for which the customs authority compiles statistics. On the other hand, the US saw a modest decrease of only 2%, maintaining its position in 12th place.

Examining the total trade volume of imports and exports between the US and China, both nations continue to achieve new records despite intense strategic competition. Last year, bilateral trade between the two countries reached an all-time high of US$759.4 billion, with the US facing a whopping US$404.2 billion trade deficit.

\"The current economic relationship between the US and China is closely intertwined, almost like Siamese twins,” remarked Ha-Joon Chang, a professor at the University of London, in a recent interview with Kyunghyang Shinmun. \"China holds the most US Treasury bonds of any country, while the US has been importing consumer goods from China at low prices.\"

Since assuming office in January 2021, US President Joe Biden has repeatedly emphasized that humanity stands at a \"turning point\" between democracy and authoritarianism. Biden has suggested that countries sharing democratic values must unite to overcome challenges posed by authoritarian nations like China and Russia. However, recent developments indicate a shifting approach.

In late March, Ursula von der Leyen, president of the European Commission, put forth a new strategy of \"de-risking\" instead of \"decoupling\" from China, a strategy that was subsequently embraced by the US. Jake Sullivan, Biden\'s national security advisor, referred to this new strategy during a speech at the Brookings Institution on April 27, stating, “[W]e are for de-risking and diversifying, not decoupling,\" and that \"We are not cutting off trade.\" He also identified semiconductors and batteries as the main targets of this de-risking approach.

As it happens, semiconductors and batteries, which are the focus of the US de-risking and diversification efforts vis-à-vis China, are key export items that drive the South Korean economy. Consequently, South Korea finds itself at a critical juncture.

Following the imposition of sanctions by China on Micron Technology, the US’ largest memory chip maker, on May 21, the American government asked South Korea to “urge its chipmakers not to fill any market gap” left by the company. China\'s Ministry of Foreign Affairs \"firmly opposes\" these actions by the US.

The battery sector is also not without its challenges. In 2022, South Korea accounted for approximately 25% of the global battery market, making it the second-largest player after China. However, South Korea relies on China for crucial raw materials used in battery production. For instance, China\'s imports of lithium hydroxide, a key material for rechargeable batteries, surged over twelvefold to US$2.2 billion in the first four months of this year compared to the previous year.

Since taking office, South Korean President Yoon Suk-yeol has pursued a \"values diplomacy\" initiative that places a strong emphasis on \"freedom.\" As a result, he has not only strengthened the alliance between South Korea and the US but also made improvements in South Korea-Japan relations. Consequently, South Korea-China relations are now on the verge of collapse.

On Friday, Chinese Ambassador to South Korea Xing Haiming expressed concern that \"the current relationship between China and South Korea is not good with risk of further deterioration\" and claimed that \"the reason or responsibility does not lie with China.\"

The US and Europe have adopted a de-risking strategy to avoid direct confrontation with China. However, for South Korea, both American technology and the Chinese market are crucial. Thus, a delicate balancing act will be necessary for South Korea to avoid becoming cannon fodder for the US and Japan.

As such, de-risking from China is most urgently needed not in the US or Europe, but South Korea.

By Choi Hyun-june, Beijing correspondent

Please direct questions or comments to [english@hani.co.kr]

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