Cargo processed at South Korea's largest port of Busan on Thursday. (Yonhap)
China, which has been South Korea's dominant export destination for almost two decades, is currently facing a challenge to its longstanding position.
According to a report by the Korea International Trade Association, Korea's reliance on exports to China has steadily declined from 26.8 percent in 2018 to 22.8 percent last year.
In the first quarter of this year, it dropped even further to 19.5 percent.
The Ministry of Trade, Industry and Energy report on Tuesday also showed that the decline in exports to China has persisted for 12 consecutive months since June of 2022.
China's trade balance has been in deficit during this period, except for a $600 million export surplus in September last year.
In January, monthly exports to China fell below the $10 billion mark for the first time in three years, recording $9.2 billion. Since then, monthly export figures to China have been fluctuating around the $10 billion level.
Exports to China in the first five months of this year amounted to $49.7 billion, seeing a 27.3 percent decrease compared to the same period in 2022 ($68.4 billion).
During the first quarter of this year, there was a significant on-year decline in various major export items to China: semiconductors by 44.6 percent, petroleum products by 20.6 percent, petrochemicals by 26.2 percent, steel by 23.9 percent, automotive parts by 34.0 percent, displays by 52.8 percent and secondary batteries by 38.7 percent.
In particular, China experienced a significant decline of 29.6 percent in its intermediate goods exports during the first quarter.
Some industry experts see that this change reflects that Korea's growth model, which involved selling intermediate goods like semiconductors to China and benefiting from its economic growth, has reached its limit.
As Chinese intermediate goods exports decline, the markets for such goods in the US, India, Australia and other countries are experiencing an expansion.
During the first quarter, intermediate goods exports to China experienced a significant decline of 29.6 percent, leading the overall decrease in intermediate goods exports. However, the share of intermediate goods exports to the US increased by 13.6 percent, marking a 1.7 percentage point rise from 2021. Additionally, countries like India and Australia also saw on-year increases in their shares of intermediate goods exports.
A KITA official sees that these shifts are necessary.
"The primary cause of the recent decline in the trade balance is the decrease in exports -- particularly due to the significant impact of declining exports to China -- rather than an increase in imports. Consequently, it has become increasingly important to actively seek out export markets beyond China in order to mitigate potential long-term consequences arising from China's weakened export performance,” the official said.
In addition, according to KITA, these shifts in the export market can be attributed to the slow recovery of the Chinese economy following the impact of COVID-19, which has led to a decrease in demand, as well as China's increased self-sufficiency in intermediate goods.
The US is emerging as the country that is replacing China's long-standing position as Korea's top export destination.
In the first quarter, Korea achieved a trade surplus of $7.2 billion with the US.
There was an increase in exports to the US in several categories, including: petroleum products (30.5 percent), petrochemicals (24.7 percent), steel (26.6 percent), automotive parts (16.2 percent), secondary batteries (50 percent) and plastic products (15.9 percent).
In April, exports to the US amounted to $9.184 billion, only $330 million less than exports to China ($9.517 billion).
Also, exports to the US have been maintaining a level of around $9 billion per month over the past year.
Other countries where Korea saw export surpluses in the first quarter include: Vietnam ($5.7 billion), Hong Kong ($4.1 billion), India ($2.8 billion), and Turkey ($2.1 billion).
By Song Seung-hyun (email@example.com)