Last Year's Current Account Surplus with China Hits Lowest in 10 Years... Impact of US-China Trade War and Semiconductor Slump

Bank of Korea '2019 Regional Balance of Payments (Provisional)'

[Asia Economy Reporter Eunbyeol Kim] Last year, South Korea's current account surplus with China recorded the lowest level in 10 years. This was due to the sluggish semiconductor market and the decline in prices of major export items amid the US-China trade war. The current account surplus with the United States continued to decrease for the fifth consecutive year.

According to the Bank of Korea's '2019 Regional International Balance of Payments (Provisional)' announcement on the 19th, last year's current account surplus with China was the lowest in 10 years since 2009 (16.26 billion USD). The surplus shrank sharply from 47.37 billion USD in the previous year to 25.24 billion USD last year. The decline was largely influenced by the downturn in the semiconductor market and the fall in prices of major export items due to the US-China trade dispute, which caused goods exports to turn to a decrease compared to the previous year. Last year, goods exports to China amounted to 116.29 billion USD, down from 141.36 billion USD the previous year, and the goods balance recorded a surplus of 18.53 billion USD, the smallest in 10 years.

However, the number of Chinese visitors to Korea increased by 25.8% from the previous year to 6.02 million, which led to the travel balance rising from 5.48 billion USD to 7.18 billion USD.

Last year, South Korea's current account surplus with the United States shrank from 24.67 billion USD to 22.05 billion USD. Since 2014 (41.5 billion USD), the surplus has been decreasing for five consecutive years. The Bank of Korea stated, "Although the service balance and primary income balance improved due to better travel balance and increased overseas investment income, the surplus in the goods balance shrank as exports of information and communication devices and semiconductors declined."

In fact, the goods balance with the United States was 30.05 billion USD, the smallest surplus since 2012 (25.56 billion USD). Last year, goods imports from the United States reached a record high of 64.14 billion USD. The second highest was in 2018, at 63.59 billion USD. Imports of raw materials such as crude oil and gas increased.

The service balance deficit with the United States narrowed. Last year, the service balance deficit was 13.4 billion USD, down from 14.32 billion USD the previous year. The travel balance deficit was 4.34 billion USD, the smallest in six years since 2013 (-4.21 billion USD), which had an impact.

The current account deficit with Japan shrank from 24.7 billion USD to 18.82 billion USD. The deficit in the goods balance (-13.41 billion USD) narrowed due to reduced imports of capital goods such as semiconductor manufacturing equipment, and the service balance improved from a deficit of 3.03 billion USD to 0.7 billion USD due to a significant decrease in travel payments influenced by the boycott movement against Japan. Last year, the number of departures to Japan was 5.58 million, down 25.9% from 7.54 million the previous year.

The current account deficit with the European Union (EU) slightly narrowed from 9.99 billion USD to 6.09 billion USD, and the current account surplus with Southeast Asia sharply decreased from 93.91 billion USD to 79.94 billion USD.

The current account deficit with the Middle East decreased from 61.29 billion USD to 52.7 billion USD. Due to the decline in international oil prices and other factors, imports of raw materials such as crude oil decreased, reducing the goods balance deficit. The current account surplus with Central and South America slightly shrank from 7.96 billion USD to 4.42 billion USD.

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