South Korea posted a trade surplus of $240 million with China, its biggest export destination, in February, the first surplus in 17 months since September 2022, according to government data.
It is a welcome sign that the country’s trade balance with China swung to the black helped by a pickup exports of semiconductors. But this reversal in trade may be only temporary, as Korea faces an increasingly uphill battle with China in global trade as well as in technology competition.
One depressing piece of evidence lies in the 2022 Technology Level Assessment Results released by the Ministry of Science and ICT last week. The biennial report showed that China outpaced Korea in 136 key technologies across 11 major fields for the first time.
The ranking sets the science and technology level of the US in 2022 as the baseline or 100 percent and compares four other nations (Korea, the EU, Japan and China). according to this benchmark, the EU ranked second at 94.7 percent, followed by Japan at 86.4 percent.
Notably, China took the No. 3 slot at 86.2 percent, outpacing Korea at 81.5 percent. Compared with the levels seen two years ago, Korea gained 1.4 percentage points, while China advanced by 2.6 percentage points.
As far as 50 national strategic technologies, the ICT Ministry report revealed a wider gap: China at 86.5 percent and Korea at 81.7 percent.
The result came as a shock for some Korean policymakers, who have long taken the country’s technological superiority over China for granted. But the change in the rankings did not surprise industry watchers who closely tracked the technology trends of both countries and noted China’s aggressive investment in science and technology.
In terms of the time gap, China was three years behind the US in technological competitiveness, while Korea was 3.2 years behind. What matters more is the pace of China’s advance. Over the past decade, China narrowed its gap with the US dramatically -- from 67.5 percent to 87.9 percent -- in information and communication technology.
In particular, China is fast catching up with the US in artificial intelligence, aerospace and quantum computing thanks to the Chinese government’s focus on the future-oriented fields.
Korea retains its edge in semiconductors, secondary batteries and electronic displays -- at least for now -- but its leadership on the global market faces tough challenges, as the technology gap with China is narrowing at a rapid clip.
Some critics warn the Korean government should reconsider its policy on investment in technological innovation. The Yoon Suk Yeol administration came under criticism last year when it slashed the budget for research and development, marking the first R&D budget cut in 33 years. The move touched off strong protests from scientists and the opposition parties. Despite President Yoon’s assurance that the cut was intended to reassess R&D strategy and that he would increase the related budget during his tenure, skepticism lingers over the government’s will to enhance the country’s strength in science and technology.
In contrast, China continues to focus on nurturing cutting-edge industries and drawing top talent under the “Made in China 2025” policy, a national strategic plan and industrial policy initiated in 2015 to boost its manufacturing sector of China. Thanks in part to such policy and the surging sales of electric vehicles, China sprinted to the world’s No. 1 car exporter last year.
The increased stature of China on the global market is fundamentally different from the past. Between the late 1990s and early 2000s, it was an explosive growth of cheap Chinese-made goods; now, China is ratcheting up its export drive involving a wider range of products including cars and consumer electronics, often outsmarting local competitors.
Given the intensifying competition with China, the Korean government must strive to regain the country’s technological edge by properly allocating its R&D budget and overhauling policy strategies on high-tech industries. If not, even the country’s leadership in select technology fields might evaporate soon.
