South Korea's Increasing Trade Dependence with Vietnam and China in Industry... Need for Supply Chain Stabilization

[Asia Economy Reporter Hwang Yoon-joo] Recently, the trade dependence within industries among developing countries in Asia, such as Vietnam and China, has increased, highlighting the need for strategies to stabilize global supply chains. "Intra-industry trade" refers to the phenomenon where exports and imports of similar goods within the same industry occur simultaneously. For example, South Korea exports semiconductors to China while simultaneously importing them from China; this trade pattern falls under intra-industry trade. As intra-industry trade expands, supply and demand shocks in overseas markets are more effectively transmitted to the domestic market, increasing the likelihood that the domestic market synchronizes with overseas economic fluctuations, making supply chain management more important.

According to the "Status of South Korea's Intra-Industry Trade and Supply Chain Management Strategies" released on the 15th by the Korea International Trade Association's International Trade and Commerce Research Institute, as Korean export companies establish production bases overseas and intermediate goods trade increases, inter-country division of labor has expanded. As of 2019, South Korea's intra-industry trade dependence accounted for 42.7% of total exports, steadily rising from 31.8% in 2008.

In trade between South Korea and four countries?China, the United States, Japan, and Vietnam?the intra-industry trade dependence was highest with China (39.6%), followed by Japan (32.8%), Vietnam (25.1%), and the United States (20.7%). Notably, from 2012 to 2019, after the global financial crisis, intra-industry trade dependence with Vietnam and China increased significantly by 16.8 percentage points and 8.9 percentage points, respectively. In contrast, there was little change in intra-industry trade dependence with advanced countries such as the United States and Japan.

The report explained, "Intra-industry trade with Vietnam and China has expanded mainly in the high-tech electronics and telecommunications sectors," adding, "Trade in the semiconductor industry with China has been active, with the share of intra-industry trade in semiconductor items increasing from 48.3% in 2012 to 62.0% in 2019. With Vietnam, intra-industry trade in items such as home appliances (4.2% → 63.9%) and wireless communication devices (20.6% → 64.6%) has grown significantly."

Another characteristic noted in the report is that "In intra-industry trade with Vietnam and China, South Korea mainly imports low-priced products from both countries and exports higher-priced products back to them," stating, "This trend reflects a form of 'quality-advantaged vertical intra-industry trade,' where export unit prices are higher than import unit prices."

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