A report released by the Institute of International Trade and Commerce Research of the South Korean Trade Association on July 1 showed that South Koreas exports to China (continental China) decreased by 19.9 percent last year, the decline was the highest in 40 years.

Exports to China decreased significantly

According to the report, South Koreas exports to China in 2023 were $12.48 billion, down 19.9% from the previous year ($15.58 billion). This was the year with the largest decline in South Koreas exports to China since the 1980s. At the same time, South Koreas trade receipts to China had a deficit of $18.1 billion, which was also the first deficit since 1992.

The report noted that this is mainly due to significant changes in the Korean-China trade structure and supply chain structure of Korean enterprises.As China gradually shifted from a medium-sized importing power to an exporting power, South Korea faces huge challenges in exporting to China.

Changes in import structure

Meanwhile, South Korea’s share of intermediate products imported from China is increasing. Data show that the share of intermediate products imported from South Korea rose from 27.3% in 2016 to 31.3% in 2023. Among them, China’s imports of key intermediate products such as precursors, lithium hydroxide, cathode materials increased significantly from $100 million to $200 million in 2016 to $2.5 billion in 2023.

This shift in import structure reflects China’s increased position in the global supply chain.South Korea is increasingly reliant on China’s intermediate products, which not only increases the trade imbalance between South and China, but also puts South Korea’s exports to China under greater competitive pressure.

Reduced exports of intermediate products

The report also noted that the share of intermediate products exported by South Korea to China in the total export of products among them also declined rapidly. This further shows that Chinas role in the global industrial chain is shifting from a major intermediate product consumer to a major intermediate product supplier. With the upgrading of Chinas manufacturing industry and the rise in technology, Chinese companies competitiveness in the global market has increased significantly, which poses a huge challenge to South Koreas traditional advantage industry.

Tactics and suggestions

In the face of changes in Chinas industrial structure, South Korea needs to take positive measures to address the problem of reduced exports and trade deficits.The report suggests that South Korea should promote the diversification of mainstream exports and find new export growth points.In particular, South Korean companies should actively explore Chinas second and third-tier cities and domestic demand enterprise markets to seek new business opportunities.

In addition, South Korea should step up its efforts to pioneer emerging markets and reduce its dependence on the single market. Through economic and trade cooperation with other countries and regions, South Korea can market diversification and reduce trade risks.