Korean exports to U.S. rise and to China fall as global economy shifts

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Korean exports to U.S. rise and to China fall as global economy shifts

Exports to the United States are rising while exports to China are falling as the largest foreign markets for Korean products take different courses and face different conditions and as Korea gets closer to the United States.  
Exports to the United States from July 1 to 20 grew 19.7 percent on year while those to China dropped 2.5 percent.  
In the first half, exports to China were 23.2 percent of the total exports. This is a drop of 1.9 percentage points compared to the same period the previous year, according to trade statistics data from the Korea Customs Service. Monthly exports to China are falling steadily, with the trade balance with China reaching a deficit of 1.1 billion dollars, the first-ever monthly deficit in 28 years.
Exports to the U.S. rose 0.4 percentage points over the same period and were 15.7 percent of the total in the first half. Exports to the United States have been in surplus so far this year.
The trend is notable in high-tech exports. High-tech products include those related to aerospace, computers and office machines, electronics and telecommunications, pharmacy, scientific instruments, electrical machinery, chemistry, non-electrical machinery and armaments, according to the Korea International Trade Association (KITA).  
Exports of these products to China, including Hong Kong, dropped 2.6 percent year-on-year in June, the 22nd monthly decline, while those to the United States increased by 14.4 percent, up for 30 consecutive months.
Information and communication technology (ICT) product exports hit a record in June except to China, according to the Ministry of Trade, Industry and Energy.  
The country's ICT market share in China is expected to fall gradually. Korea had a market share of 19 percent, about the same percentage as Taiwan, in 2015. That has dropped to 15.9 percent. The gap between Korea's and Taiwan's shares widened to 9.3 percentage points.  
Korea's market share in the U.S. high-tech market increased in the past few years. It rose from 3.5 percent in 2017 to 4.2 percent in 2021, a jump from the eighth-largest to the sixth-largest country. The expansion of chip exports drove the boost in the U.S. market share.  
Efforts to reduce the technology gap between Korea and China, disruption of the global supply chain, Covid-19 lockdowns and the Chinese government's involvement in the operations of Chinese company are some reasons for the falling exports to China from Korea.
The government is drafting measures to recover the country's exports to China.
"Various measures, such as support of trade finance and improvements of regulations, will need to be drawn up,"said First Vice Minister of Strategy and Finance Bang Ki-seon during a meeting of economy-related vice ministers on July 22.
"We will support domestic companies to recover exports to China by promoting cooperative businesses and strengthening export marketing," said Lee Chang-yang, minister of trade, industry and energy on the same day.
As of now, it is highly unlikely to find measures that would bring immediate changes. Korea joining the Indo-Pacific Economic Framework (IPEF) and the U.S.-led Chip 4 are some factors that are likely to hinder the export growth to China.
"Korea should participate in the IPEF and the Chip 4 alliance considering the international situation, but a thorough explanation and cooperation will be needed to resist backlash from China," said Cheong In-kyo, an international trade professor at Inha University.  
"Korea would need to strengthen export capability in system chips and actively expand other categories such as the aerospace and pharmaceuticals," said Kim Min-woo, a chief researcher at KITA.

BY CHUNG JONG-HOON, CHO JUNG-WOO [cho.jungwoo1@joongang.co.kr]
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