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South Korea exported more goods to the US than to China last year for the first time in almost two decades, underlining shifting trade patterns as Washington draws more allies into its supply chains and Beijing boosts its manufacturing self-reliance.
Goods exports from South Korea to China fell almost 10 per cent to $122bn between 2021 and 2022, according to data released by the Bank of Korea this week. By contrast goods exports to the US increased by more than 22 per cent over the same period to $139bn.
It is the first time since 2004 that South Korea — the world’s tenth largest economy with companies such as Samsung that are a bellwether of global trade — has exported more goods to the US than to China.
The figures reflect a surge in US demand for Korean cars, while exports of Korean semiconductors to China have slumped amid a slowdown in the global memory chip market.
The US is the only one of South Korea’s top 10 export partners to which exports have grown over the past five years. Led by battery makers LG Energy Solution, SK On and Samsung SDI, and solar company Hanwha Q-Cells, South Korean companies have also been among the largest foreign investors in the US semiconductor and clean tech sectors.
By contrast China is waning in importance. A study published this month by the Korea International Trade Association showed that since 2021, the share of Korean exports going to China has declined in sectors including petroleum products, petrochemicals, steel, auto parts and displays.
In the first three months of 2023, Korean exports to China fell below 20 per cent of the total for the first time since 2005, according to the trade association.
Analysts at the Korea Center for International Finance have attributed the structural decline in Korean exports to China to Beijing’s “Made in China 2025” strategy to use subsidies to boost its manufacturing of machinery and precision tools.
“Many Chinese business are manufacturing intermediate goods, which we mainly export,” Rhee Chang-yong, the governor of the Bank of Korea, told lawmakers last month. “The decade-long support from the Chinese economic boom has disappeared.”
In an interview with the FT last year, South Korean trade minister Ahn Duk-geun cited Beijing’s policy to “arbitrarily interfere with businesses” as well as its “dual circulation” import substitution policies as the most important factors driving foreign companies to reduce their exposure to China.
He added that over the course of the next decade, the “structure of trade” between South Korea and China “will be changed”, moving down the value chain as the exchange of sensitive technologies is increasingly controlled.
Park Chong-hoon, head of Korea research at Standard Chartered, said: “There has been a structural change going on in Korean-Chinese economic relations over recent years as Chinese companies, with Beijing’s support, move up the technological value chain.
“But we should remember that the most important Korean export to China is high-end semiconductors, which are going through a downturn at the moment. As the global IT sector picks up again, so will Korean exports to China.”
