SME exports fall in the first half as trade war bites

Exports by small and medium-sized enterprises (SMEs) were weighed down by the ongoing U.S.-China trade dispute, falling 2.7 percent in the first half of the year compared to the previous year.

The Ministry of SMEs and Startups reported Friday that outbound shipments from companies with assets less than 500 billion won ($426.7 million) stood at $51 billion in the first half of the year from $52.5 billion a year earlier.

The decline reflects the overall slump in exports as total outbound shipments from the country fell 8.5 percent to $271.3 billion through June this year from the same period a year earlier.

The government cited the drawn out U.S.-China trade row and a global manufacturing slowdown in explaining the decline in SME exports.

Exports fell despite the number of SMEs shipping their products overseas increasing.

According to the SME Ministry, there were 63,333 such companies in the second quarter this year, a rise of 1.4 percent, or 903 companies, from the same period a year earlier.

SME exports to China, Korea’s largest trade partner, fell 6.5 percent to $11.5 billion in the first half the year from a year earlier. China accounted for 22.6 percent of exports by small and medium-sized firms so far this year. Major exports to China, such as cosmetics, semiconductors, synthetic resin, declined in the second quarter.

Exports to Hong Kong, which take 3.6 percent of SME exports, fell 26.8 percent in the first half from a year earlier. Semiconductor exports to Hong Kong in the second quarter fell 34 percent from a year earlier.

Shipments to the United States rose 5.9 percent in the first half due to strong demand for auto-related products.

By sector over the period, semiconductor exports fell 11 percent amid slowing global demand, while cosmetics exports, the second-largest export category for SMEs, fell 7.6 percent due to fierce competition with local brands in China.

SME Minister Park Young-sun expressed worry about the export outlook, citing recent trade restrictions imposed by Japan against Korea.

“Due to the lengthening of the U.S.-China trade conflict that has led to declining exports, worsening external conditions, such as Japan’s export restrictions, are expected to make the export environment for SMEs even more difficult in the second half of the year,” said Park in a statement.

The minister has called for responding to Japan’s tightening of industrial material exports to Korea by speeding up development of industrial material production by domestic SMEs.

Park added that the government will focus on policies to help SMEs work with larger-sized companies in research and development on industrial materials.

The ministry has set up a support fund of 208 billion won for companies affected by Japan’s trade restrictions.

The SME minister also urged Thursday local semiconductor companies to use hydrogen fluoride, one of the materials restricted by Japan, produced by local SMEs.

BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]