Shift in Korea-China Trade Dynamics Signals Intensifying Competition | Be Korea-savvy

Shift in Korea-China Trade Dynamics Signals Intensifying Competition


Yangshan Port in Shanghai, China (Image courtesy of Yonhap)

Yangshan Port in Shanghai, China (Image courtesy of Yonhap)

SEJONG, Jan. 13 (Korea Bizwire) — South Korea’s export landscape with China has undergone a significant transformation over the past decade, with traditional intermediate goods exports such as displays, computers, auto parts, steel sheets, and petroleum products sharply declining.

Conversely, South Korea’s imports of Chinese intermediate goods, particularly battery materials, batteries, and auto parts, have surged.

Analysts attribute this shift to China’s rapid advancements in technology and pricing competitiveness across various manufacturing sectors, weakening the previously strong complementary trade relationship between the two nations and heightening direct competition.

Decline of Korea’s Traditional Export Strongholds

According to the Korea International Trade Association, South Korea’s top exports to China in 2015 included semiconductors, displays, wireless communication devices, auto parts, synthetic resins, petrochemical intermediates, petroleum products, computers, basic petrochemicals, and steel sheets.

However, by 2024, auto parts, computers, and steel sheets had fallen out of the top 10, with displays and petroleum products slipping in ranking.

This shift coincides with the rise of China’s manufacturing capabilities under initiatives like “Made in China 2025,” eroding Korean companies’ dominance in sectors such as displays, petrochemicals, and steel. Chinese firms, led by BOE, have overtaken the low-cost LCD market and are aggressively expanding into the OLED sector, historically led by Korean firms.

Market research firm DSCC projects China’s share of global display production capacity will grow from 68% in 2023 to 74% by 2028, while production in Japan, South Korea, and Taiwan will decline. Consequently, South Korea’s display exports to China plummeted 79% from 2014 levels, totaling $4.62 billion in the first 11 months of 2024.

Chinese display and television manufacturers, including TCL Technology Group and Hisense Home Appliances Group, have unveiled new products for CES 2024, aiming to capture a larger share of the global market from Samsung Electronics and other smaller competitors. (Image courtesy of TCL)

Chinese display and television manufacturers, including TCL Technology Group and Hisense Home Appliances Group, have unveiled new products for CES 2024, aiming to capture a larger share of the global market from Samsung Electronics and other smaller competitors. (Image courtesy of TCL)

Surge in Chinese Exports to Korea

China’s manufacturing edge is also evident in its growing exports to South Korea. In 2024, South Korea’s imports from China prominently featured precision chemical materials, industrial electrical devices, batteries, pharmaceuticals, and auto parts—categories largely absent in 2015.

Particularly notable is the sharp rise in imports of battery precursors and components like anode materials. South Korea imported $6.97 billion worth of precision chemical materials, including key battery inputs such as precursors and lithium, reflecting the battery industry’s heavy reliance on Chinese supply chains.

Formerly a leading export item, auto parts have reversed roles, becoming a major import. In 2015, auto parts ranked fourth in South Korea’s exports to China, but by 2024, they ranked among the top imports. This change reflects declining market share for Korean automakers in China and increased sourcing of parts from Chinese suppliers.

Intensifying Korea-China Industrial Rivalry

The weakening division of labor, where Korea supplied intermediate goods for China’s manufacturing, has evolved into fierce competition across basic and advanced industries. China is aggressively advancing into Korea’s core export sectors, including memory semiconductors and automobiles, escalating competition in global markets.

An industry official noted, “China’s rapid industrial development has intensified competition for Korea. Strategic responses are essential for Korea to adapt to industrial changes and cultivate new growth drivers.”

According to a Korea Trade-Investment Promotion Agency (KOTRA) report, Korea’s export competition index with China rose to 38.5 in the first three quarters of 2024 from 38.0 in 2019. Notably, the semiconductor sector recorded an exceptionally high competition index of 72.2, reflecting China’s parallel focus on memory semiconductors.

Since 2023, Korea has recorded consecutive trade deficits with China, marking a significant shift from the past when China consistently ran trade deficits with Korea.

Cho Eun-kyo, head of the China Research Team at the Korea Institute for Industrial Economics & Trade, stated, “Beyond China’s overproduction concerns, the real threat lies in its enhanced technological and price competitiveness in sectors like electric vehicles, solar energy, and batteries. Korea must maintain its technological edge in semiconductors while adopting strategic, focused responses to this growing competition.”

Ashley Song (ashley@koreabizwire.com)

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>