Not Only Ali and Temu... KIEP: "South Korea's Dependence on China for Key Supply Chain Items Deepens"

As Chinese distribution companies such as AliExpress and Temu expand their influence in South Korea, threatening domestic distribution companies, concerns have been raised that the dependence on China is also deepening for key supply chain items such as critical minerals and energy.

On the 14th, the Korea Institute for International Economic Policy (KIEP) stated in its report titled "Characteristics of China's Foreign Trade in 2023 and Implications for Korea-China Trade" that "structurally, South Korea's dependence on China is intensifying," and analyzed that "Korea's exports to China, based on the current product structure, will face constraints in the mid to long term, and as a result, the trade deficit structure with China is likely to persist."

According to KIEP, last year, South Korea's import dependence on China (22.2%) surpassed its export dependence (19.7%) for the first time and continues to increase. In contrast, China's import dependence on South Korea (6.3%) has been steadily decreasing. This means that while South Korea depends on China, China does not significantly need South Korea.

The surplus size of intermediate goods, which has driven South Korea's trade surplus with China over the past five years (2018 to last year), is also shrinking. During this period, South Korea's export growth rate of intermediate goods to China decreased by an average of 4.3% annually, while the import growth rate recorded 8.1%. Excluding semiconductors, the trade balance of intermediate goods with China turned into a deficit last year.

The share of key supply chain items (critical minerals, energy, ICT, public health) in South Korea's imports from China also increased from 52.6% to 57.9% over the past five years, with the share of critical minerals rising notably from 4.0% to 6.5%. During the same period, South Korea's import dependence on China increased from 19.9% to 22.2%, the import dependence on key supply chain items rose from 16.5% to 19.5%, and particularly for critical minerals, it expanded from 14.0% to 21.6%.

KIEP emphasized, "Excessive dependence on China for securing critical minerals will act as a factor threatening our economic security," and added, "As South Korea relies on overseas imports for most (about 95%) of its mineral demand, diversified international cooperation with major mineral-producing and supplying countries is essential to ensure stable procurement of critical minerals."

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