The latest signal of the resilience of the Chinese economy, which saw 4.9% year-on-year growth in 2020’s third quarter, comes from neighboring trade powerhouse South Korea.
In the first half of 2020, with Covid-19 on a global rampage, South Korea’s exports to China fell just 6.4% – compared with an 11.3% fall in exports to the world overall, a report from the Korea Trade Investment Promotion Agency, or KOTRA, that was picked up by Yonhap News Agency, found.
China and South Korea were, respectively, the first and second nations to suffer mass Covid-19 infections. Using very different strategies, both economies have largely contained the coronavirus since then. However, the pandemic continues to run rampant across the United States, Western Europe and elsewhere.
Chinese purchases from South Korea were particularly strong in the fields of textiles and electronic components, the KOTRA report showed.
There was high first-half demand in China for South Korean masks, personal hygiene items and clothing. South Korean fashion and cosmetic items are often seen as aspirational in China, due to the influence of Hallyu – the “Korean Wave” of pop music, TV dramas and films.
Higher up the value chain, shipments of semiconductors and other electronic components were also solid. As per its latest Five-Year Plan, Beijing is massively expanding investments into high-tech industries.
However, it is unclear how much of a sales decline South Korean players Samsung and its cross-town rival SK hynix – which, along with Micron of the US, are the three biggest global producers of memory chips – will suffer in the second half.
China vs USA, with Korea in the middle
Speaking more broadly, South Korea’s alliance with Washington has traditionally been a massive financial boon for the country. But over the last three years, liabilities have started to accumulate.
In September, Washington slapped sanctions on electronics parts exports to Chinese tech flagship Huawei. Samsung and SK Hynix, which use American technologies in their processes and products, had little choice but to comply.
In 2017, the installation of a US missile defense system, THAAD, equipped with powerful radars that Beijing says can snoop way beyond North Korea and on to its own strategic assets, triggered retaliation. Chinese tour groups to South Korea dried up, Korean content disappeared from Chinese screens, Korean products suffered boycotts and the giant Lotte Group was forced to shut downs its retail operations in China.
Since 2019, Seoul and Washington have engaged in tortuous negotiations after the latter demanded a 500% annual increase in the host country’s payments for US troops stationed on its soil. And this year, South finds itself ducking the cross-Pacific salvoes of a US-initiated trade war.
The latter is unusually problematic for Seoul, as China is South Korea’s largest trade partner.
China accounted for 25.5% of Korea’s total exports in the first half year, according to KOTRA – up from 25.1% a year earlier. Moreover, when Hong Kong’s numbers are added, China’s percentage of South Korea’s total exports rises to 31.8%.
With China now in resurgent growth mode, recent data buttresses KOTRA’s H1 figures.
In September 2020, according to information provider OEC, South Korea exports to China were worth $12.3 billion, while those to its second largest export destination, the United States, were worth $7 billion.
If Hong Kong’s numbers are included ($3 billion), South Korea sold more than twice as much to China as to the US.