South Korea’s share in China’s import market fell to 6% last year, reaching the lowest level in three decades since 1993, when the share was 5.2%. Given that 1993 was one year after Korea and China established diplomatic relations, recent data reveals a marked shift in trade dynamics between the two nations.
Korea also slipped to third place in China’s ranking of importers by country, indicating that preference for Korean products in China has declined as Korean products lose competitiveness in the Chinese market. Korea’s trade deficit with China surpassed $18 billion (24 trillion won) last year, the largest on record. The deficit is attributed to changes in the global supply chain brought on by the U.S.-China tensions and China’s growing competitiveness in the manufacturing sector.
China imported goods worth $162.5 billion from Korea last year, down 18.8% from the previous year, according to the Korea International Trade Association (KITA) on Jan. 28. Imports from Korea accounted for 6.3% of China’s total imports. In China’s ranking of importers by country, Korea dropped from second to third place, trailing behind Taiwan (7.8%) and the United States (6.5%).
The collapse of the previous supply chain dynamics, where Korea supplied intermediate goods for China to process into final products, has taken a toll on Korea’s key exports, such as petrochemicals, steel, and petroleum products.
China’s increasing self-sufficiency has also negatively impacted Korea’s exports. Korea’s semiconductor sector, the cornerstone of the country’s exports, has experienced a significant slowdown last year. Korea used to be China’s top importer for seven consecutive years from 2013 to 2019, but Korean-made smartphones, automobiles, and displays have been losing ground in the Chinese market. The market share of these products in China has been steadily declining, from 9.9% in 2017, 8.4% in 2019 and 7.4% in 2022.
“As trade relations between Korea and China are becoming more competitive, Korea needs to devise strategies to target the Chinese domestic market and invest in new growth industries,” said Cho Sang-hyun, head of the Institute for International Trade at KITA.
