Bank of Korea: "US-China Conflict Burdens Third Countries... Efforts Needed to Stabilize Supply Chains"

[Asia Economy Reporter Seo So-jeong] Recently, as major Western countries including the United States have strengthened sanctions against China and Russia, the burden is affecting not only the sanctioned countries but also third countries. As mutual economic sanctions between the U.S. and China intensify in the future, negatively impacting our economy, there is an analysis that efforts to stabilize supply chains should be strengthened in the long term.

According to a report titled "Recent Key Features and Implications of Economic Sanctions" published on the 23rd in the Overseas Economic Focus by the Bank of Korea’s U.S. and European Economic Team and Trend Analysis Team, "Considering the trend of deglobalization and economic bloc formation, the increase in economic sanctions among major countries is likely to continue," it stated.

The Bank of Korea expects that as U.S.-China conflicts deepen, secondary ripple effects of sanctions will occur on third countries due to the importance of the sanctioning and targeted countries in the global economy and their connections within the global value chain (GVC).

Additionally, with the importance of supply chain stability increasing due to the pandemic and the Ukraine crisis adding to this, deglobalization and economic bloc formation are expected to accelerate.

The International Monetary Fund (IMF) assessed in June that following the Ukraine crisis, the world economy’s bloc formation could be strengthened through shifts in energy trade and fragmentation of payment systems.

In particular, it was suggested that as deglobalization and economic bloc formation increase, confrontations between countries and blocs will rise, making economic sanctions more frequent.

The Bank of Korea emphasized, "Although South Korea may face restrictions in accessing the opposing market, the risk of having to choose one side among the two economic blocs is increasing. The rise in sanctions among major countries raises uncertainty in the global economy and can especially shrink trade activities. Therefore, it is necessary to closely examine the impact of economic sanctions on our economy and to make long-term efforts to stabilize supply chains."

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