Hyundai Research Institute "COVID-19 Negatively Impacts South Korean Exports Highly Dependent on China"

[Asia Economy Reporter Kim Eunbyeol] The Hyundai Research Institute analyzed that the novel coronavirus infection (COVID-19) and the US-China Phase One trade agreement could negatively affect South Korea's exports.

Researcher Ryu Seunghee cited in the economic weekly report released on the 8th the following factors as potentially having a negative impact on South Korea's exports: ▲Double C (Corona-China) fear ▲weakening of the global value chain ▲decrease in exports to China due to the US-China Phase One trade agreement ▲possibility of expansion of trade disputes between the US and the European Union (EU). The share of exports to China in South Korea's total exports rose from 10.7% in 2000 to 25.1% in 2019.

First, the economic slowdown in China caused by COVID-19 is expected to act as a downside risk to South Korea's exports, which are highly dependent on China.

The weakening of the global value chain (GVC), where production, distribution, and sales processes span multiple countries due to the infectious disease impact, is also a negative factor for exports. The share of intermediate goods exports in total global exports decreased from 57.8% in 2011 to 55.1% in 2018.

Researcher Ryu also noted that, according to the US-China Phase One trade agreement, China has agreed to increase imports of US products, so South Korean products competing with US goods may see a decline in exports. It is analyzed that South Korea's main export items such as information technology (IT), machinery, and steel products could be hit by this.

Trade disputes between the US and the EU are also variables for South Korea's exports. If the US imposes tariffs on EU products to reduce its chronic trade deficit with the EU, a new trade war could break out.

However, the semiconductor market's potential recovery from sluggishness this year and the high growth rate in the Association of Southeast Asian Nations (ASEAN) region are positive factors for South Korea's exports.

Major forecasting institutions expect the memory semiconductor market, which contracted by -33% last year, to turn to a 4.1% growth this year. However, if the COVID-19 outbreak prolongs and smartphone demand weakens, the semiconductor market is likely to decline again.

Researcher Ryu suggested, "Active export stimulus measures should be taken in preparation for the economic downturn in China caused by COVID-19," and added, "The government and companies should devise strategies to minimize damage to domestic industries that may arise from the US-China Phase One trade agreement."

This content was produced with the assistance of AI translation services.