China’s trade with the Republic of Korea is becoming increasingly competitive

China and South Korea’s industrial sectors, which were complementary a decade ago, have become increasingly competitive in the mid- and upper-tier manufacturing sectors, a trend expected to intensify in coming years, market watchers said on Friday.

As China continues to expand its opening up and make breakthroughs in areas such as shipbuilding, electric vehicle production and foldable smartphones, concerns are growing among South Korean business leaders about the country’s growing competitive advantage, according to a recent interview by the South Korean-based Seoul company Korea International Trade Association (KITA), which represents 73,000 member companies around the world.

In interviews conducted by KITA with 30 business executives operating in China, both South Koreans and foreigners, many noted that China has not only caught up with South Korea in most industries except semiconductors, but has already overtaken it in several sectors. They also emphasized that the sense of urgency in China is much stronger than in South Korea.

The KITA report highlights concerns raised by executives from a variety of sectors, including automotive, components, batteries, petrochemicals, aerospace, distribution, gaming, biotechnology and finance.

Hwang Jae-won, China’s top representative at the Seoul-based Korea Trade and Investment Promotion Agency, said South Korea had consistently maintained a trade surplus with China until 2022 as China’s decades-long urbanization drive led to strong demand throughout the country. various industries in the field of equipment, materials and components from South Korea.

Hwang, however, said that with China’s rapid technological progress, Chinese companies have gradually outperformed South Korea in many sectors, which has reduced China’s demand for imports from South Korea, leading to the country’s first trade deficit with China in 2023.

Hwang noted that South Korea is paying close attention to these developments and acknowledges that if it continues to pin the future of its trade with China on traditional industrial products such as industrial components and machinery, achieving long-term growth will be difficult.

“As a result, South Korea is placing greater emphasis on exporting consumer goods such as cosmetics, clothing and food to China, while exploring opportunities in services trade. This marks the first major correction in the current economic and trade situation between South Korea and China, he added.

Chen Bin, deputy director of the expert committee at the Beijing-based China Machinery Industry Federation, said: “Through several initiatives, China has focused on emerging sectors such as electronics, unmanned aerial vehicles, automotive, LNG (liquefied natural gas) carriers and new energy technologies that directly compete with South Korea’s traditional strengths.”

Recognizing these realities, Ni Yueju, a research fellow at the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, said competition between China and South Korea in the global automotive market is becoming increasingly fierce, especially after China has gained a clear advantage in the sector electric vehicles, fundamentally changing the competitive landscape.

He suggests that China and South Korea work on strengthening cooperation at both government and corporate levels to jointly promote innovation and development in the automotive industry, especially in the areas of battery development, intelligent connected vehicles and talent exchange.

South Korea remained China’s fourth-largest trading partner in the first eight months of 2024, with a total trade value of 1.51 trillion yuan ($215.3 billion), up 8% year-on-year, accounting for 5. 3% of the total value of China’s foreign trade for this period was shown by data from the General Customs Office.