The Bank of Korea: "China Drives Our Export Recovery This Year... Contribution Surpasses the US"

Bank of Korea 'BOK Issue Note - Evaluation of Recent Recovery Factors in Our Exports and Future Prospects'

[Asia Economy Reporter Kim Eun-byeol] The Bank of Korea evaluated that China's consumption and IT investment expansion have driven the strong performance of South Korea's exports amid steady goods consumption this year. It is forecasted that the export boom will continue in the second quarter as the effects of additional US economic stimulus measures appear and China's growth momentum persists.

On the 16th, the Bank of Korea stated in its report titled 'BOK Issue Note - Evaluation of Recent Recovery Factors of Our Exports and Future Outlook' that "analyzing export contributions based on the final destination, US import demand led the recovery of South Korea's exports in the second half of last year, followed by a significant rise in China's contribution in the first quarter of this year." The final destination of exports refers to the country that ultimately uses South Korea's exported goods.

Goods exports in the first quarter of this year increased by 2.1% compared to the previous quarter, with the US contribution at 0.4 percentage points, while China's contribution reached 3.8 percentage points. Accordingly, China's contribution greatly surpassed that of the US.

Last year, the US contribution to South Korea's exports rose to 9.3 percentage points in the third quarter but gradually declined to 3.6 percentage points in the fourth quarter and 0.4 percentage points in the first quarter of this year. In contrast, China's contribution increased from 0.5 percentage points to 2.5 percentage points and then to 3.8 percentage points during the same period.

Joo Wook, head of the International Trade Team at the Bank of Korea's Research Department, explained, "In the second half of last year, non-IT import demand driven by the US recovery in goods consumption and inventory replenishment contributed significantly, while in the first quarter of this year, IT import demand driven by China's consumption and investment recovery played a major role."

However, he noted that export contributions by country may vary depending on each country's situation. Joo said, "China's contribution may remain high for the time being, but since US economic stimulus measures have been implemented and the US economy is also recovering considerably, there is a possibility that the US contribution could surpass China's."

South Korea's exports are expected to maintain a strong trend in the second quarter, supported by economic recoveries in the US and China. The effects of additional US economic stimulus measures and the continuation of China's growth momentum are expected to sustain the increase in import demand from these countries. The expansion of global semiconductor demand and the rise in pent-up consumption also positively impact South Korea's exports.

However, the Bank of Korea sees supply-side factors such as shortages of automotive semiconductors and production disruptions of mobile phone semiconductors by South Korean companies as potential constraints on exports. As vaccination expands and consumption in major countries like the US recovers mainly in face-to-face services, which have a low import-inducing effect, there is also a possibility that the growth rate of South Korea's exports may moderate in the future.

Since April this year, IT exports have slowed in growth on a daily average basis compared to the first quarter. Factors such as the weakening demand for parts procurement by Chinese IT companies and production disruptions at overseas factories of South Korean companies due to 5G communication chip shortages have influenced this trend. Although the shortage of automotive semiconductors is unlikely to be completely resolved, the prevailing view is that it will gradually ease from the second half of the year.

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