Industrial Research Institute: "1,088 Key Items with High Dependence on Chinese Imports... 56% Are Intermediate Goods"

[Sejong=Asia Economy Reporter Kwon Haeyoung] An analysis has emerged that South Korea's dependence on intermediate goods imports from China is higher than that of the United States or Japan, making it strategically vulnerable.

According to the report titled "Analysis of Supply Chain Vulnerability and Ripple Effects in Korean Industry" released by the Korea Institute for Industrial Economics and Trade on the 18th, a total of 1,088 items requiring attention due to strategic vulnerability were identified in South Korea's imports from China as of last year, including urea, silicon, lithium, and magnesium.

Recently, the United States and the European Union (EU) have recognized high import dependence on specific countries and trade imbalances as key indicators of supply chain vulnerability. Based on this criterion, the Korea Institute for Industrial Economics and Trade selected "items of concern" that have a trade deficit and an import dependence rate of 50% or higher from China. Among these, 653 items were classified as "vulnerable items" with an import dependence rate of 70% or higher.

Among the 1,088 "items of concern," 604 were intermediate goods and 264 were consumer goods, with intermediate goods being more numerous. Furthermore, the number of intermediate goods requiring attention has significantly increased over the past decade. Analyzing trade statistics from 2007 using the same criteria shows that the number of intermediate goods requiring attention was about 488, meaning an increase of 116 items over 14 years. This suggests that South Korea's strategic vulnerability to China has grown in the intermediate goods sector.

Compared to the United States and Japan, the vulnerability in the intermediate goods sector was also higher.

The United States had a total of 575 "items of concern" from China, of which 185 were intermediate goods, significantly fewer than South Korea. Japan had 1,048 items of concern from China, with 475 being intermediate goods. Items such as urea, which have recently raised vulnerability issues, have been continuously identified as items of concern or vulnerable items since 2017.

Many of these items with high dependence on China are closely related to South Korea's key domestic industries, raising concerns that a "second urea solution crisis" could occur at any time.

The report recommended the establishment of industry-specific response strategies to strengthen supply chain stability. Major countries, including the United States and China, have recently explicitly introduced economic security policies while strengthening the linkage between industrial, trade, and technology policies.

Kim Bau, a senior researcher at the Korea Institute for Industrial Economics and Trade, emphasized, "It is necessary to establish a data-driven private-public cooperation channel that can continuously monitor the supply chain vulnerability of key items," adding, "It is essential to conduct in-depth analysis of items of concern and vulnerable items to identify strategic items that must be domestically procured by industry and to prepare emergency plans including stockpiling."

However, he added that strategies to produce all items domestically or diversify sources are difficult to apply to all items and involve enormous costs, so they should only be pursued in essential areas.

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