South Korea’s unprecedented 3-month long trade deficit with China not seen as ‘systematic change’
- South Korea’s trade with China recorded a US$570 million deficit in July following shortfalls of over US$1 billion in both May and June
- South Korea’s semiconductor exports to China increased by 10.9 per cent month on month in July, but steel, petrochemical and petroleum products all declined
South Korea’s unprecedented three-month long trade deficit with China does not indicate an immediate “systematic change” in the relationship, with both the Seoul government and analysts pointing to the slowdown in the world’s second largest economy.
Last month, South Korea’s trade with China recorded a US$570 million deficit following shortfalls of over US$1 billion in May and US$1.2 billion in June, according to official data released on Monday. Before May, South Korea last registered a trade deficit with China in 1994.
South Korea’s total exports to China in July fell by 2.5 per cent month on month to US$13.2 billion, while imports hit US$13.8 billion, according to the Ministry of Trade, Industry and Energy.
“[The trade deficits are the] result of a combination of the effects of China’s slowing economic growth, regional lockdowns caused by the coronavirus,” the Korean government said.
As Korea’s trade dependence on China is very high right now, the slowdown in China’s economic growth rate has led to a slowdown in exports
The unprecedented figures have, though, still prompted domestic concerns about decreasing Korean export competitiveness in China.
“As Korea’s trade dependence on China is very high right now, the slowdown in China’s economic growth rate has led to a slowdown in exports, which in turn led to a trade deficit and decreased exports for Korea,” said Kang Sung-jin, an economics professor at Korea University.