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Korea’s exports to China face minus growth

Dec. 7, 2014 - 20:38 By Shin Ji-hye
Korea’s outbound shipments to China are likely to post a negative growth in 2014 for the first time in five years, according to government data released on Sunday.

Industry watchers said this downward trend may continue with the Chinese economic slowdown deepening and even worse, the country is slowly reducing its reliance on Korea’s intermediate goods. 

Shipments to China slipped 0.5 percent on-year through November this year, according to the data compiled by the Ministry of Trade, Industry and Energy.

If the trend continues, the growth of the nation’s exports to China may fall below zero for the first time since the global financial crisis in 2009, market watchers said.

The Bank of Korea, in a report published last month, also concurred with the view that the two biggest reasons for the fall in exports to China are the slowdown in China’s economy, and its reduced reliance on Korean intermediate products.

The Chinese economy, the world’s single largest importer of Korean products, is forecast to suffer its worst slowdown in 24 years this year with annual growth projected at 7.4 percent.

China’s growing domestic production of intermediate products is a critical factor. Currently, intermediate goods comprise over 70 percent of Korea’s exports to China, and mainly include high-tech products such as computer parts and semiconductors.

“As China has been stepping up its efforts to improve technology-intensive industries in recent years, locally-produced Chinese goods are increasingly replacing Korean imports,” said Han Jae-jin, a researcher at the Hyundai Research Institute.

As a case in point, exports of Korean small and medium enterprises to China declined 37.4 percent in wireless communications devices, 25.6 percent in semiconductors, and 25.3 percent in computer parts on-year in the January-August period, according to the Korea Small Business Institute.

“It is time for Korean companies to diversify their export strategies, and turn to China’s growing premium consumer goods markets,” said Jang Sang-sik, a researcher at the Korea International Trade Association’s Institute for International Trade.

By Shin Ji-hye and news reports
(shinjh@heraldcorp.com)