The Recent Slump in South Korea's Exports to China: Analysis of Causes and Implications

Recently, South Korean exports to China have been consistently weak. In the second quarter (Q2) of 2023, the stabilization of energy prices did help narrow the trade deficit with Korea’s large neighbor to the west. However, Korean exports remain sluggish. The trend in China-bound exports shifted to a decline in Q2 2022, and since then the magnitude of the decline has only expanded, reaching USD 102.6 billion in 2023, a 23 percent decrease compared to the same period the previous year. Concerns are growing about the possibility of a prolonged slump in exports to China, even considering the difficulties in bilateral trade during the COVID-19 pandemic and China’s zero-COVID policy. Examining trends in Korea-China trade, several observations stand out. While changes in the proportion of imports from China are minimal, we can note a clear decline in the proportion of exports to China. From Korea’s perspective, the proportion of exports to China reached its peak at 26.8 percent in 2018, and has since fallen to 19.7 percent (2023). Imports have held steady at around 20 percent. On the other hand, China’s proportion of imports from South Korea fell from 10.9 percent in 2015 to 6.2 percent in 2023, indicating a relative reduction in Korea’s role in the Chinese import market.