China Holding the Leash of Over 23,000 SMEs

[Asia Economy Reporter Park So-yeon] As the conflict between the United States and China spreads across all fronts, an analysis suggests that about 23,000 domestic small and medium-sized enterprises (SMEs) with high trade dependence on China could be directly impacted.

According to the Korea International Trade Association on the 5th, there are approximately 8,000 SMEs with an export ratio to China exceeding 80%, and about 15,000 SMEs with an import ratio from China exceeding 80%. By detailed product categories, the import dependence on China exceeds 80% for items such as secondary battery materials and other fine chemical raw materials, wafers for solar cell manufacturing, LCDs, automotive parts like wiring harnesses, and wireless repeaters.

The problem is that with the high trade dependence of domestic SMEs on China, China could increase pressure on Korea more than ever amid the escalating US-China conflict. In this case, domestic SMEs are highly likely to suffer production disruptions and other damages first, so it is pointed out that preparations such as securing alternative import countries are necessary with the cooperation of the government and related organizations.

There are also calls for adjusting the export dependence concentrated on the US and China. Over the past five years, the export share to the US and China has consistently remained above 35%. In particular, more than a quarter of total exports are sent to China. Korea’s top five export markets are China, the US, Vietnam, Hong Kong, and Japan, and the export share to these countries increased by about 10 percentage points over the past decade, from 49.3% in 2009 to 58.7% in 2019.

Gang Nae-young, senior researcher at the Korea International Trade Association’s Trend Analysis Office, said, "It is necessary to diversify export markets to regions such as New Southern Policy countries, New Northern Policy countries, and Latin America to disperse risks," adding, "SMEs with high import-export dependence on China face production and export difficulties when a China-originated crisis occurs, so it is necessary to alleviate the concentration on China." Researcher Gang added, "In the future, building a global supply chain requires a complex strategy that considers not only cost reduction and market acquisition but also various factors such as pandemics, export regulations, US-China tariff and technology wars, the Hong Kong situation, and protectionism."

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