‘Splain Me (Korea Edition)

Many of the readers here are probably not familiar with the Korea JoongAng Daily. It’s a South Korean daily. I wanted to pass along this editorial:

The world’s most populous country saw its population decrease by 850,000 last year to total 1,411,750,000 for the first time since the Great Chinese Famine in 1961. The fall in population and working population will translate into that much of a decline in consumption and output. The phenomenon is a loss not just for the country but the world economy. South Korea relies heavily on external trade, especially with China. Exports to China made up 22.8 percent of total outbound shipments last year. Our 2,000 import items in raw materials and others rely on China for more than 80 percent. Outbound and inbound trade must brace for risks from China.

The economy must wean away from China. Government and corporate efforts must accelerate. Korea must pivot more aggressively towards India, rising as the next China, and Vietnam which was the largest surplus maker for Korea last year, as well as other Asean countries and the Middle East.

I found the editorial baffling. I simply don’t see a direct causal connection between a decline in China’s population and a decline in its trade with South Korea. If anything it might be the other way around.

South Korea runs a trade surplus with China. It doesn’t sell much in the way of consumer goods to China—most of its sales to China are integrated circuits, machinery, and refined petroleum. Even with a declining population it’s hard for me to imagine China’s demand for refined petroleum products declining in the near to medium term. If anything I expect China’s demand for ICs and machinery to rise. Just because it has fewer people doesn’t mean it will stop manufacturing for export.

2 comments… add one
  • CuriousOnlooker Link

    There’s multiple factors at work.

    First, South Korea’s exports are dominated by two categories, “IT products” (chips, “screens” likes LCD/OLED, phones) and vehicles.

    In the case of vehicles, while Korea is a leader in EV’s — China domestic automakers are further ahead and the Koreans along with everybody else is losing marketshare. In “IT products”, there is a colossal inventory correction going on as the pandemic driven demand reverses. Long term is not looking bright either because the Koreans are expected to align to a de-facto export ban the US is imposing on chip equipment and advanced chip exports; and China is reacting by going all out on chip sufficiency on mature nodes — that leaves no niche for the Koreans to sell to the Chinese to.

  • Drew Link

    Interesting commentary, especially curious.

    My only observation is the admonition to avoid gross statistics, like population, and focus on subtrends, which, I believe, are actually Dave and Curious’ real points.

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