April 24, 2024

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[THE INVESTOR] China’s economic retaliation against the deployment of US missile defense system THAAD could cost South Korea nearly US$15 billion, a research institute said on March 8.

In the report, Chang Woo-ae of Industrial Bank of Korea’s research institute said that as cultural contents, tourism and exports to China will drop due to the anti-Korean measures. 

Chang based his analysis on the impact of China-Japan territorial dispute that prompted anti-Japan sentiments in China in 2010. Due to such conditions, Japan’s exports to China showed on-year drop of 20.6 percent in 2011 and 6.4 percent in 2012.

Citing South Korea’s larger trade dependence, and the country’s large export volume to China, Chang said that the impact of conflict will be bigger.

Exports account for 45.9 percent of South Korea’s GDP, and shipments to China accounts for 26 percent of all exports. In comparison, 17.9 percent of Japan’s GDP is raised from exports, and China accounts for 17.5 percent of Japan’s exports.

According to the report, in the worst-case scenario, exports will drop 10 percent, while tourists to South Korea will fall 30 percent, and added value of the contents industry would drop 20 percent. In this scenario, damage to the local economy would come to US$14.76 billion, and the country’s economic growth rate would decline 1.07 percentage points.

By Choi He-suk (cheesuk@heraldcorp.com)