US fades as factor in exports to China: BOK

When China’s exports to the US decline, so do South Korean exports to China. But the trend seems to be weakening, according to new analysis by South Korea’s central bank released Wednesday.

According to the Bank of Korea, which analyzed the final destinations of exported Korean goods using the World Input-Output Table based on the 2001-2014 period, if China’s exports to the US decline 10 percent, South Korea’s total exports would fall 0.36 percent. The analysis was conducted to gauge the impact of a possible trade tussle between the US and China.

US President-elect Donald Trump said during his election campaign that he would take steps to levy duties of up to 45 percent on Chinese goods in order to reduce the trade deficit with China.

The biggest impacts would be to electronics, semiconductors and petrochemicals, as their contribution to the country’s exports to China is sizable. Electronics and semiconductors took up 34 percent of the drop in total exports while petrochemicals accounted for 10 percent.

More than one-fifth of South Korea’s exports in 2014 went to China, accounting for $142 billion in value. China-bound exports are divided into 68.7 percent intermediate goods and 31.3 percent of final products. Exports of final products saw a big jump, adding 14.9 percentage points from 16.4 percent in 2009.

As for intermediate goods going through China, 43.8 percent were reassembled and actually sold in China. The second biggest final destination was the United States, with 5 percent, followed by the European Union and Japan, with 4.3 percent and 2 percent, respectively.

Korean goods -- both final and intermediate -- ending up in China increased by 11.1 percentage points in 2014 from 64 percent in 2009.

On the other hand, the amount of goods reaching the markets of the US and EU through China dropped by 3.8 and 3.6 percentage points, respectively.

As a result, the risk of China’s subdued exports to the US has been lowered compared to the past, the report said.

But there are new risks. With more exported goods destined for China, the country’s economic downturn could result in slow demand from the Chinese market, hurting Korea’s exports, it added. 

By Park Ga-young (gypark@heraldcorp.com)