Korean Manufacturing Struggles to Catch Up with China: Strategies for Strengthening the Sector

Seoul Institute for Social and Economic Research and Korea Institute of Finance
Joint Policy Symposium
"China is Dominating All Sectors of Manufacturing"
Strengthening Its Edge Across All Manufacturing Industries
Korea's Fast Follower Strategy Also Faces Limitations
Innovation Through Inter-Industry Collaboration Needed

As China begins to dominate the global manufacturing industry across all sectors, some argue that it has become increasingly difficult for rival countries like South Korea to catch up. In particular, China has secured control over supply chains in new industries such as electric vehicles, making it challenging for South Korea to implement its economic development model of the "fast follower" strategy. To overcome this, proposals such as innovation through inter-industry exchanges, redefining labor-management relations, and fostering small-scale manufacturing clusters in local regions have been suggested.

Ji Mansoo, Senior Research Fellow at the Korea Institute of Finance, presented these points at the policy symposium "Strengthening Korean Manufacturing in the Era of Economic Security," held on the afternoon of November 14. In his presentation on "China's Path to Dominating Global Manufacturing," Ji stated, "China has been fostering its manufacturing sector by learning from the social issues the United States experienced after outsourcing its manufacturing."

First, even in labor-intensive industries such as footwear and wigs, China continues to maintain export competitiveness and market share, which differs from the historical experiences of export-oriented manufacturing countries like South Korea and Japan. Ji cited two reasons: the lack of alternative production bases to replace China, and the transformation of these industries into platform-based sectors utilizing artificial intelligence and robotics, making rapid catch-up by latecomer countries impossible. He also noted that even in capital-intensive industries where South Korea is competitive, the Chinese government is directly supporting its companies, making competition difficult. For example, in major export sectors for South Korea such as semiconductors and petrochemicals, many of the leading companies in China are state-owned enterprises that have received government support.

Ji predicted that South Korea would face an even greater crisis in emerging industries such as electric vehicles and batteries, where China is rapidly building its competitiveness. He explained, "China is playing a leading role in new industries by creating initial markets, forming industrial ecosystems, and securing supply chains through economies of scale." He added, "In these new sectors, China is able to handle development, commercialization, mass production, and sales entirely on its own, leaving no opportunity for foreign latecomers to catch up quickly." In other words, it is difficult for South Korea's growth model-the fast follower strategy-to be effective under these circumstances.

Various solutions to overcome these challenges were also proposed. Min Taegi, Director of S&H Research Institute, cited former Apple Chief Design Officer Jonathan Ive and SpaceX as examples, arguing that original products must be created through exchanges with other industries. He said, "Apple's operating margin exceeds 80%, and SpaceX manufactures space shuttles in the United States at low cost," noting that their commonality lies in not simply reducing product costs through cheap labor, but by redesigning products through design innovation. He emphasized that applying ideas from other fields of knowledge to technology is key to making this possible.

Cho Sungjae, Senior Research Fellow at the Korea Labor Institute, pointed out that as South Korea's demographic structure changes, it is becoming increasingly difficult to utilize labor in manufacturing. He stressed that the government cannot solve all problems alone and that employer organizations must resolve labor issues by coordinating with workers. In other words, labor issues should be addressed through coordinated actions among stakeholders. Additionally, Yang Seunghoon, Professor of Sociology at Kyungnam University, noted that not only information technology but also manufacturing is becoming increasingly concentrated in the capital region, accelerating the decline of local areas. He argued that while local governments are striving to attract large corporations to address this, it may be more effective to foster small manufacturing companies and create manufacturing clusters that can generate synergy effects.

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