Last Year’s Record High Current Account Surplus with the US... Largest Deficit with China

Impact of Strong Automobile Exports
Decline in Exports to China Due to Semiconductor Slump

Last year, strong automobile exports led to the largest-ever surplus in the current account balance with the United States. On the other hand, sluggish semiconductor exports caused the current account balance with China to turn into a deficit, with the deficit reaching a record high. Amid escalating US-China tensions, our main export market is rapidly shifting from China to the United States.

According to the "2022 Regional Balance of Payments (Provisional)" released by the Bank of Korea on the 22nd, the current account surplus with the US expanded significantly from $44.54 billion in 2021 to $67.79 billion last year. Kim Hwayong, head of the International Balance of Payments Team at the Bank of Korea's Economic Statistics Bureau, explained, "The goods balance surplus widened due to increased exports of passenger cars and other vehicles, while the services and primary income balances improved respectively due to increased transportation income and dividend income, resulting in the largest-ever current account surplus with the US."

The current account balance with China shifted from a surplus of $23.41 billion in 2021 to a deficit of $7.78 billion last year, marking a return to deficit. This is the first deficit since 2001, when it was $760 million. The deficit also reached a record high. The goods balance turned to a deficit due to decreased exports of machinery, precision instruments, and petroleum products, alongside increased imports of raw materials. The services and primary income balances worsened due to increased transportation payments and decreased dividend income, respectively.

The current account balance with Japan recorded a deficit of $17.78 billion, a reduction from the previous year's deficit of $22.2 billion. The goods balance deficit narrowed due to increased exports of chemical products and petroleum products, and the primary income balance improved due to better dividend income.

The current account balance with the European Union (EU) turned to a surplus of $7.04 billion from a deficit of $630 million the previous year. Exports increased mainly in petroleum products and chemical products, and the primary income balance improved due to increased dividend income.

The current account surplus with Southeast Asia was $80.23 billion, down from $102.36 billion the previous year. This was due to increased imports of raw materials and decreased dividend income, which reduced the surpluses in the goods and primary income balances. However, the services balance reached a record high of $4.92 billion, which the Bank of Korea explained was due to increased income from IT-related business services.

The current account deficit with the Middle East expanded from $47.98 billion to $88.05 billion. The rise in international oil prices and a significant increase in imports of crude oil and other raw materials worsened the goods balance.

The current account balance with Latin America recorded a deficit of $1.66 billion, an increase from the previous year's deficit of $360 million. This was due to a reduction in dividend income from local subsidiaries, which decreased the surplus in the primary income balance.

Korean nationals' overseas direct investment last year was $66.41 billion, slightly up from $66.6 billion the previous year, mainly driven by investments in Southeast Asia and China. Investment in the US was $27.85 billion, slightly down from $28.27 billion the previous year, but investments in Southeast Asia ($14.25 billion → $15.34 billion), China ($5.51 billion → $7.29 billion), and the EU ($6.24 billion → $6.44 billion) increased.

Team leader Kim said, "The scale of overseas direct investment in China and Southeast Asia is the largest ever," adding, "The slump in exports to China is largely due to semiconductors, but if the semiconductor market recovers in the future, demand will increase, and direct investment will also rise." He continued, "Although the outlook is uncertain due to ongoing US-China tensions, there are positive factors such as Hyundai Motor and Kia's continued commitment to expanding in the Chinese market."

Foreign direct investment in Korea was $18 billion, down from $22.06 billion the previous year due to reduced investments from the US, Southeast Asia, and other regions.

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