Bank of Korea analysis
(Seoul = Yonhap News) Reporter Shin Shin-kyung = China’s accommodative monetary policy has been shown to have the effect of increasing Korea’s exports to China and lowering interest rates.
According to a report titled “The Impact of Changes in China’s Monetary Policy on the Korean Economy” released by the Bank of Korea on the 10th, the People’s Bank of China has lowered the reserve requirement ratio and interest rates to respond to the trade conflict with the United States and the spread of COVID-19.
The BOK analyzed the impact of China’s easing of monetary policy on Korea’s trade and finance. First of all, it was found that exports to China increased and the trade balance with China improved accordingly.
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The BOK explains that when the yuan depreciates (depreciation) due to accommodative monetary policy, China’s exports to developed countries increase, and Korea’s exports of intermediate goods to China also increase. The trade structure between the two countries is ‘vertical’, with intermediate goods accounting for 73% of Korea’s exports to China (average from August 2005 to December 2017).
In the financial market, when the yuan depreciates due to a cut in interest rates in China and the rate of return on Chinese assets decreases, Chinese investment funds tend to flow into Korea, which has a relatively high currency value and high rate of return.
As such, when investment funds from China flow into the domestic bond market, bond yields (interest rates and interest rates) fall.
In terms of prices, China’s expansionary monetary policy, which accounts for a large portion of global oil and raw material demand, leads to an increase in crude oil and raw material prices, which in turn puts upward pressure on Korean prices.
Jo Yu-jeong, head of the International Economics Research Division at the BOK Economic Research Institute, said, “The change in China’s monetary policy has been analyzed to have a significant impact on the Korean economy not only through trade channels but also through financial channels.” “As we are increasing investment in core technologies such as other technologies and fostering emerging industries such as next-generation telecommunications and new materials, significant changes are expected in the ripple path of China’s monetary policy on Korea along with changes in the trade structure between Korea and China.”
shk999@yna.co.kr
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2021/08/10 12:00 Send
