"Longer China Lockdown Negatively Impacts Korean Economy"…China's Contribution to South Korea's GDP at 7.5%

China's Contribution to South Korea's GDP at 7.5%, Largest Among Overseas Countries, Impact Inevitable

[Asia Economy Reporter Park Sun-mi] Analysis suggests that the longer and stricter the lockdown measures due to China’s ‘Zero-COVID’ policy continue, the greater the impact will be on our economy.

According to the “Analysis of the Impact of China’s Lockdown Scenarios on the Korean Economy” released on the 18th by the Korea International Trade Association’s International Trade and Commerce Research Institute, China’s final demand contributed 7.5% to Korea’s Gross Domestic Product (GDP) in 2020, the highest among foreign countries. If China imposes lockdown measures under its ‘Zero-COVID’ policy and import demand decreases as a result, concerns arise not only about Korea’s exports to China but also about a decline in economic growth.

The institute analyzed China’s lockdown measures by ▲lockdown intensity (full or partial), ▲size of lockdown area (accounting for 10% to 50% of China’s GDP), and ▲lockdown duration (6 to 10 weeks). Among realistic scenarios, a “full lockdown for 8 weeks in regions accounting for 30% of China’s GDP” would cause China’s economic growth rate this year to fall by 3.4 percentage points, leading to a 0.26 percentage point decline in Korea’s GDP growth rate.

So far, China has imposed lockdowns in Shanghai and Beijing, two regions that account for 7.4% of China’s GDP. When the economic share of the lockdown area is around 10%, China’s GDP is predicted to decline by 0.85 percentage points (6 weeks) to 1.4 percentage points (10 weeks) depending on the duration of the full lockdown, and Korea’s GDP growth rate is expected to decrease by 0.06 percentage points (6 weeks) to 0.11 percentage points (10 weeks) as a result.

If the COVID-19 spread worsens and lockdowns expand to Guangdong (10.9% of China’s GDP) and Jiangsu (10.1%), the economic share of the lockdown area will approach 30% of China’s total. In this case, the impact on Korea’s GDP growth rate under lockdown scenarios is estimated to range from a minimum decline of 0.05 percentage points (6 weeks partial lockdown) to a maximum decline of 0.32 percentage points (10 weeks full lockdown). Assuming an 8-week full lockdown, Korea’s GDP growth rate would fall by 0.26 percentage points, with the manufacturing sectors most affected being electrical equipment (0.08 percentage points), chemicals (0.024 percentage points), and basic and processed metals (0.016 percentage points), in that order.

Senior Researcher Kang Nae-young of the Trade Association pointed out, “As the control of Omicron within China is taking longer than expected, the economic slowdown caused by lockdown measures is acting as an obstacle to the growth of neighboring countries, including Korea, which heavily depends on exports to China,” and emphasized, “It is necessary for our government and companies to prepare countermeasures to minimize the damage caused by the prolonged lockdown measures in China.”

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