[Shaking Export Korea] Exports Decline Due to Tightening and COVID Lockdowns... Shifted from China to ASEAN

Export Slowdown in Major 5 Countries Including China and US... EU Also Sluggish
ASEAN Exports Including Vietnam Up 30.6%
Experts "Deteriorating External Economic Conditions"... Concerns Over Accelerated Slowdown in Second Half

[Asia Economy Sejong=Reporter Kwon Haeyoung] Despite July exports, marking the start of the second half of the year, achieving record-high performance, the shine has faded due to a sharply slowed growth rate compared to a year ago (25.5%). Among South Korea's top five export countries in the first half of this year, China, the United States, Vietnam, and Japan have all seen growth slow down, while Hong Kong experienced a contraction in exports, showing negative growth. Although exports to the ASEAN region increased by 30%, holding up relatively well, the global economic downturn signs have become more pronounced due to the Ukraine war, monetary tightening in major countries including the U.S., and China's COVID-19 lockdowns. As a result, the slowdown in export growth, a pillar of the Korean economy, is expected to accelerate further in the second half of the year.

◆Growth Slowdown in All Top 5 Export Countries... Red Light for China＝ According to the Ministry of Trade, Industry and Energy on the 1st, exports to China, South Korea's largest market, decreased by 2.5% from the previous month to $13.24 billion, marking two consecutive months of negative growth following June's -0.8%. Last July, the export growth rate was 15.7%, but it has shrunk significantly within a year. While exports to China have decreased, imports have actually increased, resulting in a trade deficit with China for three consecutive months since May, which is also problematic. Although exports to the U.S., European Union (EU), and ASEAN increased last month, their growth rates also declined compared to a year ago.

Looking at South Korea's top five export countries, the slowdown in growth began in the first half of the year. Exports to China totaled $79 billion from January to June this year, up 6.5% compared to the same period last year ($74.2 billion as of June 25). This is below last year's export growth rate (24.2%) and the overall export growth rate for the first half of the year (14.7%). Hong Kong's situation is even more severe. Exports in the first half of this year amounted to $14.1 billion, shrinking by 15.8% compared to a year ago. Exports to the U.S. and Vietnam increased by 16.9% and 22.2%, respectively, to $52.4 billion and $30.8 billion compared to the first half of last year. Although these figures show relatively good performance compared to China, their growth rates have declined from the previous year (U.S. 33.9%, Vietnam 22.9%). Exports to Japan increased by 10.8% to $15.5 billion, but growth has also slowed compared to last year's 11.2%.

In particular, China's direct hit on South Korean exports is evident as its share of South Korea's total export market fell from 25.2% in the first half of last year to 23.4% in the first half of this year. Among the top 10 export items in the first half of last year, six saw a decline in exports this year. Semiconductor exports increased by 28.7%, but display panels (-2.5%), diesel (-82.4%), cosmetics (-20.7%), semiconductor manufacturing equipment (-40.0%), wireless communication device parts (-86.9%), and other precision chemical fuels (-0.4%) decreased. Factors contributing to this include China's economic growth rate of only 0.4% in the second quarter due to COVID-19 lockdowns, reduced import share of intermediate goods due to China's technological self-reliance, expansion of the consumer goods market where South Korea has a small share, the Guochao (patriotic consumption) trend, and increased market share of Taiwan in China's import market.

[Image source=Yonhap News]

◆Exports to the EU Also Sluggish... Increased Dependence on the U.S. and Vietnam＝ The share of the U.S., Vietnam, and ASEAN regions in South Korea's total export market has expanded. The U.S. share increased from 15.2% in the first half of last year to 15.5% this year, and Vietnam's share rose from 8.6% to 9.2% during the same period. Particularly, exports to ASEAN countries, including Vietnam, surged by 30.6% in the first half, raising their share of total exports from 16.4% to 18.6%.

In the U.S. market, exports of passenger cars (-23.1%) and wireless telephones (-64.0%) decreased, while exports of semiconductors (21.1%), auto parts (12.8%), data storage media (72.6%), jet fuel and kerosene (93.8%), and batteries (34.7%) increased. In Vietnam, wireless communication device parts (-20.7%) declined, but semiconductors (43.6%), displays (29.7%), diesel (549.5%), and synthetic resins (31.5%) increased significantly. Exports to Taiwan, Singapore, and Indonesia also surged by 31.4%, 67.8%, and 31.2%, respectively, driving the ASEAN region's export growth above 30%.

On the other hand, exports to Europe, which are slowing due to the Ukraine war and monetary tightening, were as sluggish as those to China. Exports to the EU reached $32.7 billion in the first half, growing only 6.8%, causing the EU's share of exports to decline from 10.4% last year to 9.7% this year. Europe's high share of final goods exports, about 40%, makes it sensitive to local market demand and growth rates.

Professor Sung Tae-yoon of Yonsei University's Department of Economics said, "Despite the weak Korean won, the slowdown in export growth means that external economic conditions have deteriorated significantly. With global economic growth forecasts, including those for the U.S., declining, there is little prospect for export improvement in the near term."

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