"Strategic Competition Between the US and China Intensifies... Need for Preparedness Through Diversified Cooperation"

Federation of Korean Industries '2023 US-China Outlook Expert Panel Discussion'

Key guests, including Kwon Tae-shin, Vice Chairman of the Federation of Korean Industries (fourth from the left), are attending the "2023 US-China Outlook Expert Roundtable" held at the Federation of Korean Industries Conference Center on the 17th and posing for a commemorative photo.

[Asia Economy Reporter Park Sun-mi] Strategic competition between the U.S. and China is expected to intensify this year. South Korea faces a dilemma of actively participating in the U.S.-led global order restructuring while maintaining close economic ties with China.

On the 17th, the Federation of Korean Industries (FKI) held the "2023 U.S.-China Outlook Expert Roundtable" at the FKI Conference Center in Yeouido. The event discussed the economic and international order outlooks of major countries including the U.S. and China surrounding South Korea, as well as response measures from the perspective of the Korean economy.

Experts anticipated that the U.S. would reinforce Biden-style China containment and economic security measures alongside a low economic growth rate of 0.5% this year. Having introduced major economic security legislations such as the Inflation Reduction Act (IRA) and the Chips and Science Act last year, the U.S. is likely to strengthen their functions further this year. Additionally, to defend against mergers and acquisitions (M&A) of U.S. companies, the U.S. added "supply chain risks" as a new criterion in its foreign investment review process. This means that third-country companies, including those from South Korea, could be blocked from acquiring U.S. companies. As the U.S. continues efforts to curb the growth of China's strategic industries, global supply chain disruptions are likely to worsen.

Park Tae-ho, Director of the International Trade Research Institute at Law Firm Kwangjang, stated, “Not only will Korean companies already operating in China, such as in semiconductors, be unable to make additional investments, but it will also become impossible for advanced technology companies, including those in artificial intelligence (AI), to newly enter the Chinese market.” He suggested that Korean companies should prepare by diversifying cooperation to other advanced countries outside the U.S., such as Australia, Canada, Japan, and Europe, in response to this U.S.-led technological protectionism.

Regarding the Chinese economy, the government’s ability to stabilize the rapid spread of COVID-19 within the first quarter is seen as critical to economic success. Park Ki-soon, Professor at Sungkyunkwan University’s Graduate School of China Studies, said, “If economic recovery occurs within the first quarter after transitioning to a ‘with COVID’ policy, China will achieve the 5% growth rate, which is the minimum threshold it desires.” He forecasted that China will continue to introduce economic agendas aimed at boosting growth this year, including employment recovery policies for political and economic stabilization, easing regulations on platform industries, subsidies and tax benefits, and measures to normalize the real estate market. In preparation for China’s expected introduction of economic revitalization policies such as domestic demand stimulation and foreign investment attraction following the easing of zero-COVID policies, Korean companies need to closely monitor related institutional changes.

However, South Korea’s dilemma of actively participating in the U.S.-led global movement while simultaneously considering close economic relations with China has deepened.

Kwon Tae-shin, Vice Chairman of the FKI, diagnosed the Korean economy facing a complex crisis this year amid the uncertainties and power struggles of the G2 (U.S. and China) economies, stating, “With external risks such as the IRA and de-China pressures becoming the new normal, this is a crucial turning point that will determine whether Korean companies advance or fall.” Kim Bong-man, Director of the FKI International Headquarters who planned the roundtable, emphasized the need for a comprehensive national strategy including market diversification and supply chain restructuring, saying, “Korean companies’ competitiveness has chronically declined due to rigid labor markets and excessive corporate regulations, and with growing external risks such as G2 growth slowdown and supply chain hegemony competition, the sense of crisis among our companies is very high.”

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