Despite US Efforts... IPEF Member Countries Including Korea Deepen Dependence on China

Report from the Peterson Institute for International Economics, a US Think Tank

Although calls for decoupling from China are growing amid escalating US-China hegemonic conflicts, an analysis suggests that diversification is not easy for most countries, including South Korea, among the Indo-Pacific Economic Framework (IPEF) member countries, due to their heavy dependence on trade with China.

The Peterson Institute for International Economics (PIIE), a think tank based in Washington, US, stated in a recent report analyzing trade flows of IPEF member countries from 2010 to 2021 that "the IPEF diversification goal runs counter to long-term market trends."

According to the report, as of 2021, IPEF member countries had an average import share from China exceeding 30%, and the export share was about 20%. Compared to 2010, the share of China in these countries' imports and exports increased by 40% and 45%, respectively.

The report explained, "Despite the Biden administration's efforts to strengthen relationships with IPEF partners and sever ties with China, these countries are increasingly dependent on economic relations with China."

It further pointed out, "IPEF countries now import more from China than in 2010, including not only intermediate goods used in domestic production but also final goods."

In fact, China was the largest supplier of imports for all IPEF member countries except Brunei and the largest export destination for half of the member countries.

Specifically, Indonesia's import concentration index from China surged by 83% during this period, while India (74%), Vietnam (71%), and Malaysia (51%) also saw their concentration indices rise by more than 50%. South Korea showed a 6% increase.

On the export side, Brunei's export concentration to China rose sharply by 202%. Singapore (63%), Australia (46%), and Vietnam (45%) followed, and South Korea's export concentration increase also reached 30%. Japan recorded 16%.

According to the report, Singapore's increase in export concentration is due to expanded exports of machinery used in China's semiconductor manufacturing, and Brunei's explosive trade relations with China, including exports of cyclic hydrocarbons, raised its concentration index.

The report explained, "The notable increases in the concentration indices of Singapore and Brunei are related to two current key issues: the semiconductor supply chain and China's Belt and Road Initiative."

It also pointed out that supply chain diversification in the Indo-Pacific region, a goal reaffirmed by US Treasury Secretary Janet Yellen during her visit to Beijing in July, may not be easy.

The report added, "Since this trend reflects fundamental economic forces, it is uncertain what impact the supply chain agreement (IPEF), which promises monitoring and adjustment, will have."

IPEF is a US-led multilateral economic cooperation body launched officially in May last year to curb China's expanding economic influence in the Indo-Pacific region. Fourteen countries participate, including the US, South Korea, Japan, Australia, India, Thailand, Malaysia, Indonesia, Vietnam, the Philippines, Singapore, Brunei, New Zealand, and Fiji.

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