[Column] What Xi in Saudi Arabia means for Korea

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[Column] What Xi in Saudi Arabia means for Korea

Lee Sang-ryeol

The author is an editorial writer at the JoongAng Ilbo.

Korea’s rapid modernization and industrialization can largely be attributed to Chinese strongman Mao Zedong. China’s retreat from the so-called Great Leap Forward campaign and Cultural Revolution during his reign has been marked in world history. During the period, Korea indeed made a great leap forward through the export-led growth model and realized the Miracle on the Han.

Korea benefited from the void of Chinese products on the global marketplace. What if Korea had competed with the same cheap and copycat strategy with China in the 1960s and 1970s. Korea has been courted as a partner for China over the past 30 years since the normalization of ties largely thanks to its supremacy over China in economic performance. The division of labor between Korea and China — the latter exporting finished goods from the import of intermediary goods from the former — has served both countries well in an ideal win-win.

Korean companies also had reasons to thank U.S. President Donald Trump for their performance. They benefited from the trade sanctions on Chinese companies after he took power in 2017.
Chinese President Xi Jinping, left, and Saudi Crown Prince and Prime Minister Mohammed bin Salman pose before a meeting at the Royal Palace in Riyadh, Saudi Arabia, Dec. 8, to sign an MOU for $30 billion of projects to open a new era for the two countries. [XINHUA]

At that time, China was emerging as a serious threat to Korean manufacturers due to its advancements in industrial structure. The added U.S. sanctions on chip-related exports to China are also believed to have helped Korean chipmakers buy time to outpace their Chinese counterparts.

But there are limits to the gains from restrictions on a competitor, as effectively suggested by the scorecard of the two countries. Korea has incurred monthly losses in exports to China for seven straight months and trade deficits for the last six months. That means Korean products are selling less in China and Chinese products selling more in Korea. Korea has been lagging behind Chinese competitors in display, smartphone, and battery sales. Korea’s trade surplus with China has been shrinking since 2019. If not for semiconductors, the country would have seen a deficit in annual trade with China last year. On the global market too, Chinese names have long posed as the strongest competitor to their Korean counterparts.

Chinese President Xi Jinping recently visited Saudi Arabia. Xi, who had been cold to repeated requests for a visit from Seoul, chose the kingdom for his third overseas trip since the outbreak of Covid-19 for multiple reasons. Western analysts believe the visit reflects China’s shrewd diplomacy and Riyadh’s bold move to upset Washington by cozying up to Beijing.

Saudi Arabia welcomed Xi with red-carpet treatment. The Saudi Air Force escorted Xi’s plane, and Crown Prince Mohammed bin Salman personally greeted him with a warm handshake. The scene sharply contrasted with the greeting by the heir to the throne in an awkward fist-touching with U.S. President Joe Biden when he visited Saudi Arabia in July.

The visit could worry Korea. The crown prince was the first guest to President Yoon Suk-yeol’s new official residence when he came to Seoul in November. The government paid special care to the visitor from the oil-rich kingdom. During his visit, the two governments signed a memorandum of understanding for deals worth an estimated $30 billion. The ambitious Neom City project budgeted at $500 billion could be a gold mine for Korean companies. Korea has been uplifted by the prospects of a second Middle East boom.

The deals worth billions of dollars Xi Jinping signed in Saudi Arabia are also related to the smart city construction, including an upgrading of telecommunications, construction and infrastructure, where Korean companies want to participate. The behemoth project would have room for both countries. Still, Korean companies inevitably would have to compete with Chinese counterparts to win projects.

The Middle East is no longer a desert land of the 1970s. Xi had to visit Saudi Arabia for his country. Korea must not let down its guard just because the crown prince visited the country. Korean companies will have a chance only when they beat the Chinese competition. The Yoon administration must work harder to stand up for Korean companies in the Middle East and on other global stages.
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