Korea's Position Weakens in Chinese Import Market Amid Competition from Taiwan and ASEAN

"Need for Strategies Such as Discovering High Value-Added Items"

[Image source=Yonhap News]

[Asia Economy Reporter Kim Jin-ho] South Korea, which was China's largest import source until 2019, has been overtaken by Taiwan for the top spot for two consecutive years since 2020. As South Korea's position within China weakens, analyses suggest that new strategies are needed to expand exports to China.

According to the report titled "Decline in South Korea's Market Share in China's Import Market and Our Response Measures," released on the 8th by the Korea International Trade Association's International Trade and Commerce Research Institute, South Korea's share in China's import market was 8% in 2021, down 1.9 percentage points from 2017. This is the largest decline among China's top 10 import countries, exceeding the 1.7 percentage point drop experienced by the United States amid trade disputes with China.

By product category, imports from China of South Korea's key export items such as memory semiconductors, wireless communication device components, synthetic fibers, and para-xylene (a raw material for PET bottles) generally increased; however, demand sources have partially shifted to Taiwan and ASEAN countries.

In particular, within the ICT product group?including computers and peripherals, communication equipment, and electronic components?where China's imports have steadily increased, the share of Korean products decreased from 20.5% in 2017 to 17.9% in 2021, showing the largest decline among major countries. During the same period, Taiwan's and ASEAN's import shares increased by 5.6 percentage points and 1.9 percentage points respectively, indicating that these regions are replacing South Korea.

The report analyzed that "in addition to intensified competition with neighboring countries, the decline in South Korea's market share is also influenced by import substitution due to the expansion of production facilities by Korean semiconductor companies within China."

By processing stage, sluggish exports of intermediate and consumer goods were found to have significantly impacted the decline in market share within China. Over 80% of South Korea's exports to China are intermediate goods, but while China's imports of intermediate goods increased by 50.3% compared to 2017, imports of Korean intermediate goods rose by only 21.7%. Consequently, South Korea's market share in intermediate goods imports also fell by 2.9 percentage points.

In the consumer goods import market, South Korea's share remains in the 3% range, lagging behind ASEAN, the United States, and Germany.

Meanwhile, as China's imports rapidly restructure around high-tech items, South Korea has not shown prominence even in China's high-tech import market. Taiwan maintains the top position in China's high-tech intermediate goods import market by leveraging competitiveness in key items such as non-memory semiconductors and SSDs, while South Korea's share in high-tech intermediate goods imports has declined since 2019, allowing ASEAN to surpass it.

Researcher Kim Ah-rin of the Korea International Trade Association stated, "China's suppression of processing trade and self-sufficiency in intermediate goods, along with industrial structure advancement, could pose long-term and structural obstacles to South Korea's exports to China, which are mainly composed of intermediate goods. To respond to the decline in our market share within China's import market, multifaceted efforts are needed, including diversification of export items, discovery of high value-added strategic items, and promotion of additional concession negotiations in the Korea-China Free Trade Agreement (FTA)."

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