Broaden export marketsAfter the outbreak — and fast spread — of the coronavirus from Wuhan, China, gold prices continued to rise along with the value of the dollar and Japanese yen in global financial markets. Major stock indexes also fell, signalling a global crisis. As in the case of bankruptcies of companies, the problem is not immediate risks but uncertainties over the long haul. As if to reflect the severity of the shocks, many Korean companies — including SK, which has been running a chemical factory in Wuhan, and Samsung — are hurriedly pulling out their workers from the city and no longer sending their employees to the epicenter.
The impact from the deadly virus nearly borders on panic. Thanks to a rebound in semiconductor prices and Beijing’s somewhat eased economic retaliation for the deployment of the U.S.-led Terminal High Altitude Area Defense (Thaad) antimissile system in Korea, expectations were high that a slowed Korean economy will get better after barely achieving a 2 percent growth last year. The government raised our growth rate for this year to 2.4 percent. But such hopes have suddenly been dashed by the lethal respiratory infection from China whose economy is rapidly shrinking. China is Korea’s largest export market.
The crisis is deepened by uncertain contagion routes for the virus and a critical lack of vaccines. Withdrawal from Wuhan heralds a bigger crisis. If the situation prolongs, the world economy can enter a serious phase beyond the level of decreased production and frozen consumption. Underdeveloped economies like Mongolia and North Korea can shut down their borders, but we cannot do that.
In 2003, when the severe acute respiratory syndrome (SARS) rampaged through China, Hong Kong, Macau and Taiwan, it lowered our GDP by a quarter point that year. In 2016, when the Middle East respiratory syndrome (MERS) hit South Korea and killed 38 citizens, it pulled down our GDP by 0.2 percentage points. Our tourism and aviation industries are directly affected as seen in the cancellation of a 3,000-strong group tour to South Chungcheong Province by Chinese people.
On Tuesday, the government hastily held a comprehensive meeting to tackle the challenge from China, but only came up with quick fixes. A fundamental solution is to accelerate our investments in other countries, including the rapidly growing Asean, around the globe. Furthermore, the government must beef up efforts to foster high-tech companies as in the United States, whose market capitalization exceeds $1 trillion each. To widen the gap with China, the government must concentrate on high value-added industries and speed up labor reforms and deregulation. The more precarious the market, the more aggressive policies it must devise to help the corporate sector to innovate.
JoongAng Ilbo, Jan. 29, Page 30