[Editorial] Is Korea ready for the China shock?

The world’s second largest economy that has driven global growth is losing steam. Since adopting market economy in 1978, the Chinese economy expanded by more than 10 percent annually. The pace fell to a single digit from 2010. The growth rate last year halved to 3 percent. When counting out 2020 — the first year of Covid-19 pandemic when the economy grew just 2.2 percent — last year’s growth was the poorest since the contraction of 1.6 percent in 1976 when the Cultural Revolution ended and Chairman Mao died.

The weak growth last year owes much to the rigid zero-Covid policy. Some think the lifting of lockdowns and restrictions will accelerate China’s growth this year. But most project China cannot go back to the past growth levels, given the bubbles in real estate assets and debt load at the public and private sectors. Most agree on the “Peak China” theory.

The world’s most populous country saw its population decrease by 850,000 last year to total 1,411,750,000 for the first time since the Great Chinese Famine in 1961. The fall in population and working population will translate into that much of a decline in consumption and output. The phenomenon is a loss not just for the country but the world economy. South Korea relies heavily on external trade, especially with China. Exports to China made up 22.8 percent of total outbound shipments last year. Our 2,000 import items in raw materials and others rely on China for more than 80 percent. Outbound and inbound trade must brace for risks from China.

The economy must wean away from China. Government and corporate efforts must accelerate. Korea must pivot more aggressively towards India, rising as the next China, and Vietnam which was the largest surplus maker for Korea last year, as well as other Asean countries and the Middle East.

We are living in the age when the economy and security must move as one. The U.S. and China compete fiercely over core value chains. The government and enterprises must work closely to weather the geoeconomic challenges. Korea Inc.’s capabilities must excel so that global powers cannot take Korea lightly. Seoul must take greater care so Korean companies and individuals are not damaged by domineering, unclear, and regulatory policies of Beijing.

Korean companies and businessmen exiting from China are said to be suffering unfair treatment. Seoul must demonstrate diplomatic skills so that Korean businesses are not disadvantaged from violations of market principles and global standards. The government must never make diplomatic blunders such as labeling Iran as “the enemy and biggest threat” to the United Arab Emirates during its leader’s state visit.