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[Asia Economy Reporter Lee Hye-young] Amid intensifying export competition due to China’s strategy to foster high value-added industries, there are calls for South Korea to further strengthen support centered on advanced technology industries such as semiconductors.

The Korea International Trade Association’s International Trade and Commerce Research Institute analyzed in its report “Changes in Trade Structure and Implications on the 30th Anniversary of Korea-China Diplomatic Relations,” released on the 7th, that the Korea-China trade structure is shifting from a complementary structure based on past division of labor to a mutually competitive structure.

The Korea-China trade volume, which was only $6.4 billion at the beginning of diplomatic relations in 1992, increased about 38 times to $241.5 billion in 2020. China’s share in South Korea’s trade also expanded significantly from 4.0% to 24.6% during the same period. Exports increased 49.1 times from $2.7 billion to $132.6 billion, and imports rose 29.4 times from $3.7 billion to $108.9 billion, making China South Korea’s largest export and import partner.

The traded items between the two countries rapidly shifted from simple light industry and heavy chemical products such as steel plates, synthetic resins, and textiles in 1992 to high value-added intermediate goods such as semiconductors, synthetic resins, and displays in 2021.

Since establishing diplomatic relations, China has emerged as the world’s number one manufacturing powerhouse in 2010 through long-term and consistent industrial policies, and the advancement of manufacturing has rapidly progressed, intensifying export competition with South Korea in mid- to high-technology industries such as chemicals, general machinery, and automobiles.

The export competition index between South Korea and China in the global mid- to high-technology industries rose from 0.347 in 2011 to 0.390 in 2021, an increase of 0.043 points. Especially since the full-scale US-China trade dispute began in 2018, export competition in the ASEAN market has intensified significantly. In the ASEAN mid- to high-technology industries, the Korea-China export competition index increased from 0.369 in 2011 to 0.427, a rise of 0.058 points, and in the same period, the export competition index in advanced industries rose from 0.440 to 0.552, an increase of 0.112 points.

However, looking at the degree of industrial specialization in Korea-China trade, the trade specialization index for the electronics and telecommunications sector, including semiconductors among advanced technology industries, rose from 0.212 in 2011 to 0.273 in 2021, indicating that South Korea still holds a “relative competitive advantage.” Also, the export unit price compared to the import unit price of electronic and telecommunications products increased significantly from $1.8 in 2011 to $10.5 in 2021, leading to quality superiority and high value-added exports of advanced technology.

The report advised, “As the Korea-China division of labor and trade structure are also showing signs of advancement centered on high-technology industries, export competition between the two countries is intensifying not only in major countries but also in third-country markets,” and added, “Since South Korea’s dependence on China for raw materials essential to its main manufacturing production is high, thorough supply chain management and monitoring of China’s policies and production changes are necessary.”

Jeon Bo-hee, senior researcher at the Korea International Trade Association, said, “The US’s containment of China’s advanced technology has accelerated China’s technological advancement and self-sufficiency in intermediate goods,” and added, “South Korea urgently needs to establish a national-level strategy for its export-driven industries in preparation for China’s independent technology development and localization of intermediate goods, while also expanding technical experts and strengthening technology security.”

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