In just five years South Korea has gone from selling over US$55 billion more to China than it imported to recording a trade deficit of over US$5 billion at the start of 2023, with an analyst pointing to its shrinking “technological comparative advantage”.
South Korea recorded a trade deficit – meaning it imports more than it exports – of US$5.1 billion with China in January and February, which was the highest among all its trading partners, the Korea International Trade Association said on Tuesday.
This was a larger trade deficit than South Korea had with Australia – its largest coal exporter – at US$4.8 billion and Saudi Arabia – its largest crude oil exporter – at US$4.6 billion.
In contrast, the United States contributed the largest trade surplus of US$4.1 billion in the first two months of the year.
“As [South Korea’s] technological comparative advantage shrinks, the deficit with China will widen. Therefore, it is very urgent to make efforts to keep the technology gap,” said Park Ki-soon, a senior adviser for Dentons Lee law firm.
He said that South Korea’s trade deficit with China is not a temporary phenomenon caused by the price rise of raw materials, but rather a structural problem as the comparative advantage of its products is disappearing.
Chemical raw materials, batteries and storage batteries, computers and industrial electrical equipment were the South Korean products that had the largest trade deficit with China in combined figures for January and February.
South Korea enjoyed a US$55.6 billion trade surplus with China in 2018, with the last annual trade deficit US$1.1 billion in 1992 when Beijing and Seoul established diplomatic relations.
“An example of this is the decrease in the number of surplus items and the increase in the number of deficit items in trade between Korea and China,” added Park.
South Korean businesses, Park said, must start to properly target the Chinese market and adapt to meeting the needs and preferences of consumers
