[Asia Economy Reporter Kim Eunbyeol] As China is expected to recover from the impact of COVID-19 and show solid growth this year, an analysis suggests that South Korea's exports to China will increase, centered on cosmetics and semiconductors.
On the 21st, the Bank of Korea stated in its 'Overseas Economic Focus' report, "This year, South Korea's exports to China are expected to increase, mainly in high-end consumer goods related to beauty such as cosmetics, and advanced parts and materials like semiconductors."
China is projected to achieve high growth in the 8% range this year. The Bank of Korea anticipates that as China's domestic demand-driven economic recovery accelerates, including manufacturing investment and expansion of private consumption, import demand will significantly increase due to the rising demand for advanced materials and parts associated with new infrastructure development.
The Bank of Korea explained, "Private manufacturing investment, which has a relatively large import-inducing effect, is expanding as corporate profitability improves, and consumption, which was sluggish last year, is expected to recover as employment conditions improve. Globally, as the digital economy rapidly advances, China's import demand for advanced materials and parts such as semiconductors and electric vehicles is expected to expand." It also noted that the trend of global companies in China importing intermediate goods, processing them, and exporting final products?known as the de-China phenomenon?is likely to be delayed for the time being due to the impact of COVID-19.
As China shifts to a domestic demand-driven growth structure centered on private consumption, there is a possibility that imports may not increase as much as economic growth if China's economy grows driven more by consumption, which has a lower import-inducing effect than investment. While there is high uncertainty regarding China's ability to secure advanced technology, it is analyzed that the self-reliance on advanced materials will gradually increase as the Chinese government strengthens policy support.
If China's economic recovery leads to expanded import demand, it could help the global economy also recover from the COVID-19 shock. Since South Korea has a high proportion of exports to China, the expansion of China's import demand is expected to play an important role in the direction of the domestic economy.
For South Korea, exports to China are expected to expand centered on high-end consumer goods related to beauty such as cosmetics, following China's consumption recovery, and semiconductors due to the expansion of new infrastructure investment. However, the Bank of Korea advised, "The solid recovery of China's economy is expected to have a positive impact on South Korea's exports to China. It is urgent not only to secure export competitiveness in the consumer goods market but also to maintain technological superiority in advanced parts and materials."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
