"Reduced Dependence on China Exports... Diversification to US, India, Australia, and Vietnam"

Korea International Trade Association International Trade and Commerce Research Institute Publishes Report on "Analysis of Export Slump to China and Trends in Export Market Diversification"

As the trade structure between Korea and China changes, the dependence on exports to China is decreasing, while the export growth rates to markets outside China, such as the United States, India, Australia, and Vietnam, are increasing. There is also a forecast that Korea's export markets will diversify in the future.

The Korea International Trade Association's International Trade and Commerce Research Institute published a report titled "Analysis of the Decline in Exports to China and Trends in Export Market Diversification" on the 5th, containing these findings.

The report pointed out that due to China's increased self-reliance, there is a decline in exports to China alongside a rise in imports. It analyzed that this trend is intensified particularly by the significant increase in Korea-China industrial trade in intermediate goods.

Since 2021, the export growth rate to markets outside China has surpassed the growth rate of exports to China. This indicates that Korean companies are diversifying their export destinations. In fact, last year, exports to China decreased by 4.4%, while exports to markets excluding China increased by 9.6%.

It is also noteworthy that export markets outside China are expanding in items where the share of exports to China has rapidly declined, such as ▲petroleum products ▲petrochemicals ▲steel ▲auto parts ▲displays ▲secondary batteries ▲plastic products. The dependence on China for petroleum product exports fell from 17.9% in 2021 to 7.6% in the first quarter of this year. For displays, the rate dropped from 36.0% to 26.1% during the same period.

As exports to China decrease in most items, exports to the U.S. have increased, making the market share of Korean goods in the U.S. import market in the first quarter the highest since 1990 (3.73%), reaching 3.59%. India is showing strong export performance in five items: petrochemicals, steel, displays, secondary batteries, and plastics. Vietnam is increasing exports in auto parts and displays, and Australia is seeing export growth in petroleum products.

The report used the Market Comparative Advantage (MCA) index to investigate whether the increase in exports to markets outside China leads to improved competitiveness of items within those markets. It found that the number of items with rising MCA was greater in the United States, India, Australia, and Vietnam than in China. This is the basis for the expectation that market diversification will continue in the future.

Jo Eui-yoon, a senior researcher at the Korea International Trade Association, said, "Especially Vietnam has a high proportion of Korea's intermediate goods exports but is a country where its own export self-reliance is rising, showing many similarities to China," adding, "long-term export market diversification will be advantageous only if supported by efforts from Korean companies to improve technological capabilities."