The purpose of this study is to analyze the impact of the emerging Chinese economy on production and investment in Korea’s manufacturing industry by route and time series, drawing policy implications.
Since the 1990s, China’s fast growth and integration in the world economy has become a major challenge for many countries in East Asia, including Korea. In the last 20 years, the Chinese economy has achieved rapid economic growth that averaged up to 10% each year. It presently stands as third in economic power, second in exports, and Korea’s primary trading partner. To grow Korea’s economy and China’s investment demand, it is important to understand the relative importance between capital goods, machinery and parts export, as well as routes for exporting intermediary goods to the third country. If exports in intermediary goods increase with China’s recent emergence in the economy, this could translate into an opportunity for Korea to act as a production base or medium for the Chinese economy. However, if capital goods or exports in machinery and parts increase in demand, this could mean that only the Chinese economy will absorb Korea’s exports. In the case of the latter scenario, a stable trade relationship between Korea and China would be critical in stabilizing Korea’s economic growth.
There are both negative and positive effects of the increase in export and competition between domestic manufacturing producers and Chinese producers. Overall, the negative effects were noticeable before the economic crisis, but were somewhat relieved afterwards. The positive effects became clearer after the economic crisis. In particular, before the economic crisis, import competition from China decreased productivity and the investment rate of the Korean manufacturing industry. Post-crisis productivity and investment rates showed improvement. The positive effects of increased competition with China could mainly be seen in capital goods and machinery parts exports to China, which grew even stronger after the economic crisis. The export cost of these sectors increased the productivity of the manufacturing industry.
As the recent export structure has become increasingly high-tech, to minimize the negative effects of China’s rapid growth and elicit maximum benefits, Korea must distinguish itself with advancements in the arenas of technology and human resource management. Also, since China’s export demand essentially supports the growth of Korea’s manufacturing industry, securing a stable trade relationship between the two countries is important.
중국의 부상이 한국 제조업의 생산 및 투자에 미친 영향(Emergence of china and its impact on production and investment in Korea’s manufacturing industry)
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Industry and Technology < Manufacturing|
|Holding||KDI; KDI School|