“Because we are next to China, we can receive many positive effects when China grows rapidly, but we have no choice but to become a country that receives a lot (and negative effects) when China stabilizes at i down In a situation where there are potential difficulties, China’s rapid growth after joining the World Trade Organization (WTO) increased the time for restructuring (Korea) by about 10. If China’s growth slows down, neighboring countries will surely suffer. “
This is what Bank of Korea Governor Lee Chang-yong said in a lecture at the Korea Institute for Advanced Study in August 2016, when he was serving as Asia-Pacific Director of the International Monetary Fund (IMF).
On the 22nd, BOK Governor Lee Chang-yong said, “The biggest reason for the decline in exports to China is that Chinese companies have started to produce many intermediate goods that Korea exports, and Korea’s competitiveness has disappeared. It should be see that many of the benefits gained from Chinese expertise over the past few decades have now disappeared. It is time to strengthen our competitiveness once again.”
◆ When China’s economic growth rate falls, the Korean economy’s blow rises
The reason why Governor Lee says that China’s dependence on China should be continuously reduced is because as China’s economic growth rate stabilizes downwards, the influence of countries with high dependence on China, such as Korea, will inevitably grow .
In fact, according to the Bank of Korea, Korea’s current account deficit was $4.46 billion in the first quarter. The current account is the difference between income and expenditure resulting from the trading of goods and services between countries by businesses or governments abroad. It is an analysis that the deficit has continued as the cost of buying from imports has increased more than the cost of earning from exports.
The biggest reason for the drop in exports is the drop in sales in the Chinese market. According to trade statistics from the Korea International Trade Association, Korea’s exports to China accounted for 19.5% in the first quarter, the first time since 2005 that China’s exports fell below 20%.
In particular, in the case of semiconductors, which exported the most to China, both volume and unit price are falling. Semiconductor exports fell 24.5% in the fourth quarter of last year, followed by -39.2% in the first quarter of this year and -40.5% in April. It is an analysis that China is increasing the consumption of domestic products while continuously upgrading domestic production capacity.
◆ Diversification of demand sources such as semiconductors, automobiles, AI, etc.
The Bank of Korea emphasized the need to expand into the ‘non-memory’ sector among semiconductors through ‘World Economic Outlook: Characteristics and Implications of Korea’s Semiconductor Demand Structure’ published on the 29th.
In the case of memory semiconductors, they are greatly affected by economic fluctuations, but non-memory semiconductors are less affected by economic fluctuations. Currently, Korea’s memory semiconductor exports account for 56% and non-memory semiconductor exports account for 44%. Until now, DRAM sales for servers have increased due to investment in data centers and the expansion of telecommunications during the pandemic due to the expansion of cloud services, but in the future, it is explained that it should expand around non-memory semiconductors used for mobile.
An official from the Bank of Korea said, “We need to increase competitiveness in the non-memory sector with price volatility.”
In addition, the Bank of Korea said that since the conflict between Korea and the United States is deepening, it needs to be reviewed from different angles. Currently, the United States has banned the export of advanced semiconductor production equipment to China since October last year, and also restricts the expansion of facilities in China by subsidized companies through the Semiconductor Support Act. China has also taken steps to ban the use of semiconductors produced by US companies.
An official from the Bank of Korea said, “Since the conflict between the United States and China may have a great impact on the production and investment of domestic semiconductor companies, it is necessary to examine the impact from different angles and prepare countermeasures.”
