[COVID-19 Transformation] "Avoid Being Forced to Choose Between the US and China... Strengthening Internal Capabilities Is Crucial"

Interview with Jang Ji-sang, President of the Korea Institute for Industrial Economics and Trade

Jang Ji-sang, President of the Korea Institute for Industrial Economics and Trade. (Photo by Korea Institute for Industrial Economics and Trade)

[Asia Economy Reporter Moon Chaeseok] "It seems important to strengthen internal capabilities so that our country is not forced to choose between the U.S. and China in the ongoing hegemonic competition. The goal is to possess the world's best capabilities that both the U.S. and China need."

On the 14th, Jang Jisang, President of the Korea Institute for Industrial Economics & Trade (pictured), made this assessment in an interview with Asia Economy regarding the accelerated de-China policies and changes in relations with China following the COVID-19 pandemic. President Jang said, "From an industrial perspective, the turning point when the mutually beneficial relationship between the U.S. and China shifted to a 'strategic competition' relationship was China's advanced manufacturing development strategy," adding, "Possessing the world's best capabilities that both countries require in the ongoing hegemonic competition between the U.S. and China is a condition to make the future favorable to us, including Korea-China relations."

President Jang warned that simplifying the direction of the global value chain (GVC) restructuring by saying "offshoring was the trend in the past, but now reshoring is the trend" is risky. He urged not to forget that offshoring can still be an effective alternative for certain industries or products.

He explained, "For example, in labor-intensive production, it would be desirable to move from China to alternative overseas production bases such as Southeast Asia," and added, "For reshoring to Korea to be sustainable, the production process must be technology- and knowledge-intensive and meet Korea's competitive conditions."

President Jang emphasized that future GVC restructuring policies should not remain limited to "production relocation" to third countries with favorable conditions due to rising labor costs in China. Instead, it should be an opportunity to consider transitioning to business models based on new 'sources of competitiveness' such as technology and knowledge rather than costs like labor.

He said, "The important point is that the COVID-19 crisis should serve as an opportunity for companies to reconsider their sources of competitiveness," and added, "We need to examine whether to remain at production relocation from China to third countries or to transition to new business models based on technology, knowledge, and other factors rather than wages."

He added, "Since intangible assets such as technology and knowledge have strong public characteristics, cooperation between the government and industry must be further strengthened."

President Jang stressed that the success of the government's advanced manufacturing promotion policy depends on how well high-skilled talent is secured and managed. He explained that the supply of high-level talent must be proactively provided by the state or public sector before the industry demands it on a large scale. He urged, "For Korea to develop into an advanced industrial production base, it is important for companies and the government to invest more effort in nurturing the workforce needed by the industry and building infrastructure."

President Jang also said that to seize the opportunity of digital transformation after COVID-19, regulatory reforms to activate corporate investment as well as bold restructuring of marginal industries must be pursued.