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[EDITORIALS]Economic gloom and doom

Published: 29 Apr. 2004, 22:09

Economic shock originating from China is approaching South Korea. After Wen Jiabao, the Chinese premier, made a remark to the effect that the Chinese government would apply the brakes to the overheated economy, international financial markets went into turmoil. Domestically, stock prices plummeted and the exchange rate of the U.S. dollar has skyrocketed. The worries over the failure of the Chinese economy have long been a pending issue. As the remark was made by one of the highest officials of China, the situation is not one we can pass over lightly.
The influence of China, the factory of the world, on the world economy is enormous. As South Korea’s reliance on China grew rapidly in recent years, the shock is that much bigger. Last year, China became the largest export market of Korean commodities, taking over the place of the United States. This year, the importance of the Chinese market grew even bigger. Considering the export-oriented economic structure of South Korea, it is not too much to say that the Korean economy survives thanks to the Chinese market.
Regardless of the shock from China, the Korean economy is in great difficulty. In March, investment in facilities shrank 6.8 percent and sales of retail businesses decreased. The leading composite index has gone down again. Contrary to the “early recovery theory” of the government, small and medium businesses and grass-roots people feel that the economy is going down deeper into the mire of recession.
If the growth of the Chinese economy slows down, it is doubtful whether Korea can maintain growth, not to mention recovery.
Economic experts overseas, as well as at home, have warned the government to be prepared for the change by lowering reliance on the Chinese market. The government and business circles must prepare measures to cope with it. They have to provide a contingency plan to cope with a crash-landing of the Chinese economy. Growth of domestic consumption is also urgent. To induce investment, regulations must be drastically eased and financial difficulties of small and medium businesses must be alleviated. How we respond to the shock from China will be the future of the Korean economy.