Will China Bring Benefits This Year? Growing Expectations for Exports to China

After 20 consecutive months of decline, South Korea's exports to China are attempting a rebound, leading to forecasts that this year's exports will improve compared to last year. In particular, the outlook for export improvement is gaining strength as semiconductor exports, a key item for South Korea, are performing well.

According to the Korea Customs Service on the 25th, from the 1st to the 20th of this month, South Korea's exports to China amounted to 6.805 billion dollars, a 0.1% increase compared to the same period last year. This marks the first increase in exports to China for the period from the 1st to the 20th of each month in 20 months since May 2022.

Although exports increased, imports decreased significantly, so the trade deficit with China is expected to narrow this month. From the 1st to the 20th of this month, imports from China totaled 8.067 billion dollars, down 19.5% year-on-year.

The increase in South Korea's semiconductor exports to China is estimated to have improved trade conditions. From the beginning of January to the 20th, South Korea's total semiconductor exports reached 5.3 billion dollars, a 19.7% increase compared to the same period last year. Considering that about 40% of South Korea's total semiconductor exports go to China, this is seen as an indication of increased semiconductor demand in China.

Last year, semiconductor exports to China declined, significantly expanding the trade deficit with China. However, since the end of last year, semiconductor prices and demand have risen, showing clear signs of an industry rebound. Monthly semiconductor export values have been on an upward trend since rebounding in November last year after 16 months.

Domestic and international institutions have responded positively to the improvement in South Korea's exports to China. This year, exports are expected to improve especially centered on semiconductors.

According to the International Finance Center, British investment bank HSBC stated, "Despite the sluggish Chinese economy, signs of recovery in South Korea's exports to China are positive, and there is a possibility of benefiting from growth recovery following the Chinese government's economic stimulus measures." HSBC also evaluated that "the improvement in the semiconductor market, reflected in rising memory semiconductor prices, is a positive factor for South Korean exports." HSBC forecasted that as the Chinese government increases growth support policies in fiscal and monetary aspects, service-centered recovery could expand to overall demand within China.

Barclays diagnosed, "With semiconductor price increases, IT companies are competitively securing inventory, leading to expectations of increased semiconductor export volumes from South Korea." Bloomberg also stated, "South Korean exports are recovering from a year of sluggishness as demand for products such as displays increases along with the rebound in semiconductor prices."

The Korea International Trade Association forecasted that South Korea's semiconductor exports this year will reach 119.5 billion dollars, a 21.9% increase from the previous year. It analyzed that IT exports, including semiconductors, will lead the overall export growth. Hong Ji-sang, a research fellow at the Korea International Trade Association, stated, "This year, South Korea's semiconductor export environment will improve due to IT demand recovery, memory price recovery following inventory improvement, and expansion of next-generation semiconductor demand."