[30 Years of Korea-China Diplomatic Relations]⑥ From Raw Materials to High Value-Added Industries... Fierce Competitors Between the Two Countries

"Unlike in the past, overlapping trade items... Competitors, not complements"
"We must jointly develop the advanced industry supply chain ecosystem"

[Asia Economy Reporters Kiho Sung and Hyunseok Yoo] Since the establishment of diplomatic relations between Korea and China in 1992, the trade items between the two countries have undergone rapid changes, reflecting the evolution of their relationship. At the time of the 1992 diplomatic ties, China’s economy was heavily weighted towards primary industries such as agriculture, forestry, and fisheries. However, with the recent growth of the service sector, there has been an overlap in trade items between the two countries. Experts explain that unlike the early days of diplomatic relations, Korea and China are no longer in a complementary cooperative relationship but have become fierce competitors within the same industries. Therefore, it is pointed out that a new industrial cooperation model must be developed beyond the existing cooperation framework to prepare for the next 30 years.

According to the Korea International Trade Association on the 23rd, looking at the top 10 import items from China at the beginning of diplomatic relations in 1992, imports were concentrated on raw materials for simple processing such as vegetable materials, crude oil, coal, and cement.

However, after 2000, with the advancement of Chinese manufacturing and expansion of local production, there was a rapid change in items and industries. In the 2000s, IT products such as computers and semiconductors appeared among the top 10 import items from China, marking the beginning of increased IT product imports. By 2010, semiconductors, computers, and displays occupied the top ranks of import items, confirming that China’s industry had been reorganized around IT products.

Examining Korea’s export items to China clearly shows the change in trade patterns between the two countries. At the time of the 1992 Korea-China diplomatic relations, the top 10 export items to China were concentrated in low value-added industries such as steel plates, synthetic resins, leather, and synthetic fibers. In the 2010s, the industry shifted to high value-added products such as flat panel displays and semiconductors.

It is particularly noteworthy that since last year, semiconductors have been the number one export and import item. The trade relationship between the two countries has shifted from a vertical division of labor to a horizontal division of labor, strengthening intra-industry trade. This was greatly influenced by changes in China’s industry. According to the China Statistical Yearbook, in 1992, the primary industry of agriculture, forestry, and fisheries accounted for 21.3% of China’s GDP. However, last year, it had sharply decreased to 7.3%.

Meanwhile, during the same period, the share of the service sector increased from 35.6% to 55.3%, leading Korea and China to develop similar industrial structures. This is also a result of the shift in export forms to China from production base-type investment to local market-type investment for local production and sales.

Experts point out that since the trade patterns between Korea and China have changed significantly, a new bilateral relationship must be sought. Professor Wonmok Choi of Ewha Womans University Law School evaluated, “Since the two countries have become indispensable to each other’s economies, it is time to redefine their relationship.”

They unanimously agreed that the supply chain restructuring caused by the conflict between the U.S. and China is an urgent issue. Eun-gyo Jo, a senior researcher at the Overseas Industry Division of the Korea Institute for Industrial Economics and Trade, said, “Economic dependence on China has not decreased, and it remains an important market with opportunities. It is necessary to pursue a two-track strategy that maintains connectivity with China’s supply chain while jointly developing the newly emerging advanced industry supply chain ecosystem.”

Professor Ingyo Jung of Inha University’s Department of International Trade explained, “The U.S. will continue to strengthen its isolation policy against China,” and added, “In that process, caution is needed to prevent Korea-China relations from deteriorating due to U.S. policies.”

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