Public Trade Deficit Likely to Continue for Four Consecutive Months "Unusual Signs"

Deficit of $667 million by the 20th of this month
First 4 consecutive months of deficit in 30 years of diplomatic relations
China's COVID lockdown slows demand, raw material prices rise

For the first time in 30 years since the establishment of diplomatic relations between Korea and China, a trade deficit with China is expected to continue for four consecutive months, raising alarms on the export front. If the trade deficit with China, Korea's largest trading partner, becomes entrenched, the profit structure of Korea's export-driven economy will inevitably be adversely affected.

According to the Korea Customs Service on the 22nd, Korea's trade deficit with China from the 1st to the 20th of this month reached $667 million, continuing for the fourth consecutive month. During this period, exports to China amounted to $8.11 billion, down 11.2% compared to the same period last year, while imports increased by 14.2% to $8.777 billion.

If the trade deficit with China continues until the end of this month, Korea will record a deficit for four consecutive months for the first time in 30 years since establishing diplomatic relations with China in 1992. Until now, the only time a trade deficit with China occurred was once in August 1994, amounting to $13.71 million.

The total trade deficit with China from May to the 20th of this month reached $3.555 billion. Monthly figures were -$1.099 billion in May, -$1.214 billion in June, and -$575 million in July.

The ongoing trade deficit with China this year is attributed to a slowdown in demand due to China's COVID-19 lockdowns. China's GDP growth in the second quarter of this year was only 0.4% compared to the same period last year.

The sharp rise in prices of Chinese raw materials is also a major factor increasing the trade deficit with China. Lithium, a key raw material for secondary battery production, was priced at 464.5 yuan as of the 18th, about four times higher than a year ago. Additionally, the average import price of Chinese neon gas in the second quarter of this year was $2.28 million per ton, soaring 17.5 times compared to the end of last year.

There are also concerns that Korea's export structure to China, which is centered on intermediate goods, will no longer be effective due to China's strengthening of domestic demand in advanced industries. According to a recent report titled "China's Foreign Trade and Korea-China Trade" by the Korea Institute for Industrial Economics and Trade, China accounts for about 26% of Korea's total trade, which is more than 20 percentage points higher than Korea's share (6-7%) in China's trade.

Jo Eui-yoon, senior researcher at the Korea International Trade Association's International Trade and Commerce Research Institute, analyzed, "With the advancement of China's trade structure, export competition between Korea and China has intensified not only in bilateral trade but also in the global market. Especially since the full-scale US-China trade dispute began in 2018, competition in the ASEAN market has become fierce."

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