[Public Trade Deficit] Focus on Indo-Pacific, ASEAN, and Europe as Alternative Markets Rapidly Emerging from China

South Korea's Export Share to Indo-Pacific 47.1%
Global Direct Investment Up 15%P in 10 Years
High Value as a Global Production Base
ASEAN as Advanced Manufacturing Hub Replacing China
Europe Expands Trade Scale Led by Nuclear Power

The Indo-Pacific (Indo-Pac) and ASEAN (Association of Southeast Asian Nations) regions are gaining attention as export markets to diversify from the China-centered export market. Amid the increasingly severe global supply chain disruptions caused by the prolonged Russia-Ukraine war and China’s zero-COVID lockdown measures, there are opinions that investment and exchanges with the Indo-Pac and ASEAN regions should be strengthened to secure stable export routes.

According to the Korea International Trade Association on the 15th, the Indo-Pac region accounts for 44.8% of the world’s Gross Domestic Product (GDP) and 35.3% of global merchandise trade. Korea’s export share to the Indo-Pac region was 47.1% last year, up 5.3 percentage points from 2015. It is a region with high growth potential enough to sufficiently replace China’s export share (25.3%), which is the largest single-country trade volume.

The Indo-Pac region holds high value as a global production base. The share of global direct investment increased from 31% in 2010 to 46% in 2020, establishing itself as an investment region replacing China. This contrasts with the stagnation of direct investment in China. Korea’s investment in China, which reached $7.432 billion in 2007, decreased to $4.691 billion in 2020. The Indo-Pac region is attempting supply chain restructuring through the Indo-Pacific Economic Framework (IPEF) led by the United States. For example, in semiconductors, it is said that efforts can be combined to secure new demand by utilizing U.S. manufacturing equipment facilities, Korea’s memory semiconductor design and production capabilities, and Taiwan’s system semiconductor technology.

ASEAN is also expected to play the role of an advanced manufacturing hub replacing China. From January to October last year, exports to ASEAN amounted to $87 billion, a 21.0% increase compared to the same period the previous year. Its export share ranks second after China. In particular, driven by strong sales of 5G smartphones and the global expansion of demand for non-face-to-face IT products, exports of intermediate goods such as semiconductors and displays performed well.

Cooperation with Europe has also become active under the new government. Efforts are underway to seek export routes linked with domestic companies in sectors such as nuclear power, defense industry, automobiles, and batteries. First, national-level support is expected for nuclear power plant orders in countries like Poland and the Czech Republic. Last month, Choi Sang-mok, the senior presidential secretary for economic affairs, stated in Spain, where the NATO (North Atlantic Treaty Organization) summit was held, that "Europe is the world’s second-largest market after the United States" and called it "the start of top-level sales diplomacy for new export leading industries," which is known to be a remark with the nuclear power industry in mind. Korea’s export share to Europe has shown an increasing trend for three consecutive years, rising from 12.8% in 2019 to 13.9% last year.

Professor Sung Tae-yoon of Yonsei University’s Department of Economics said, "Based on the high potential of emerging Indo-Pac countries such as India and ASEAN, the growth trend toward major consumption and production markets is expanding."