Korea registers its first trade deficit with China in 31 years due to shift in electronics market

[Beijingwalker]

Korea registers its first trade deficit with China in 31 years due to shift in electronics market
Alexander Saraff Marcos
December 22, 2023


South Korea has consistently got the better of China in the electronics field, until now | © Gabriel Freytez
South Korea will record a trade deficit with their largest trading partner, China, for the first time in 31 years, having been their main supplier of semiconductors and electronics.

In a year when trade relations with Japan improved, Korea may also record an overall trade deficit in 2023, as in 2022, only the second time since 2008.

Korean electronics companies export billions of dollars of semiconductors to China, given Korea’s dominance in the electronics industry. Semiconductors are essential components for electronic devices, such as mobile phones or laptops.

Thanks to companies like Samsung and SK hynix, South Korea is considered a source of high-quality electronic products and semiconductors, and has consistently been a top exporter of them to large economies like China.

The appearance of Chinese technological companies has changed the dominant trend.

Korea’s 30-year electronics dominance​

China’s overall trade surplus has been increasing over time. The United States had a trade deficit of 367 billion dollars with China in 2022, and the European Union had a deficit of 27 billion euros in 2022.

According to the Korean International Trade Association (KITA), a business organization dedicated to recording Korean international trade trends, Korea’s trade balance with China sat at ‑18 billion dollars as of November 2023. Prior to 2022, Korea maintained a strong surplus with China, reaching trade balances of 60 billion dollars in certain years.

The main drop started occurring in 2022, when there was only a 1 billion dollar surplus between Korea and China, while it was usually at 20 billion dollars or more for each year.

China’s global trade role​

Since 2022, the Chinese market has evolved to meet its own electronic needs. Chinese electronics and semiconductor manufacturers are now able to supply its own electronics to some extent, creating competition for Korean companies.

The Chinese government, operating a planned economy, has placed export quotas on fertilizer companies to regulate the increasing price of fertilizers. As South Korea imports most of its fertilizer from China, it has suffered from shortages in fertilizers such as urea. However, the sheer size of the Korean and Chinese electronics markets has obscured the impact of the fertilizer market on trade balances.

Korea was one of the few major economies that maintained a trade surplus with China, but that trend seems to have reversed now.

Korea’s sudden trade deficit with China due to shift in electronics market

While Korea has consistently been at a significant trade surplus with China for 31 years, this year will put a stop to that trend. The Chinese technological industry has gained standing in the world market, leading to a rare trade deficit for Korea.

www.newsendip.com

 

[Beijingwalker]

Same happened to the trade between China and Japan a few years back, once it gets past this point, it will be no return, their deficit with China will go by leaps and bounds by each passing year.