"Our Exports Will Recover... US-China Trade Agreement and Improvement in China's Economy Impact"

Industrial Research Institute's Report on 'Recent Export Conditions Improvement and Recovery Potential'
Reduced External Uncertainty, Semiconductor Price Increase... "Positive Impact on Exports"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Bo-kyung] A report has been released suggesting that South Korea's exports, which had been sluggish, are likely to turn positive due to the US-China trade agreement and the recovery of the Chinese economy.

On the 22nd, the Korea Institute for Industrial Economics & Trade (KIET) stated in its report titled "Recent Improvement in Export Conditions and Possibility of Recovery" that "With the Phase 1 US-China trade agreement, the improving trend in major Chinese economic indicators, and a clear recovery in semiconductor prices, the possibility of South Korea's exports returning to an upward trend is increasing."

Last year, South Korea's exports decreased by 10.3% compared to the previous year, marking the largest decline since the 2008 financial crisis. The drop in semiconductor prices accounted for more than half of the total export decline, and exports to China, the largest export market, also significantly decreased due to the US-China dispute and the slowdown in the Chinese economy.

However, as the decline narrowed in December, expectations for export recovery this year are growing.

First, the Phase 1 US-China trade agreement is expected to have a positive impact not only on the global economy but also on South Korea's exports, as it alleviates the greatest uncertainty in the global economy. If investments by global IT companies, which had been delayed due to uncertainty, resume, it is anticipated that the recovery of the semiconductor industry will gain momentum along with export recovery.

On January 2nd, the first working day of the new year, citizens are walking to work at Gwanghwamun Intersection in Seoul. Photo by Mun Ho-nam munonam@

Additionally, recent improvements in major Chinese economic indicators suggest that the slowdown in the Chinese economy is stabilizing.

The International Monetary Fund (IMF) also adjusted its forecast for China's growth rate upward by 0.2 percentage points to 6.0%, signaling positive movements that are expected to have a favorable effect on South Korea's exports.

China's imports from South Korea increased by 5.4% year-on-year in December, marking the first increase since October 2018.

Expectations for a recovery in semiconductor export prices in 2020 are also spreading. The spot price of DRAM has risen nearly 10% since mid-November, and NAND flash prices have also shifted to a gradual upward trend since the second half of last year.

In the shipbuilding sector, the delivery of high-priced LNG carriers and container ships ordered since 2016 is expected to significantly contribute to export recovery this year.

A KIET official stated, "Active government support policies are necessary to accelerate the export recovery trend," and added, "It is essential to maintain a constant response system and strengthen monitoring for global uncertainties such as Japan's export restrictions and Brexit."

Furthermore, the official suggested, "To diversify South Korea's export structure, which is concentrated in certain products and markets, efforts should be made to expand exports in the Fourth Industrial Revolution and new industry sectors through industrial policy initiatives."