SEOUL, July 1 (AJU PRESS) - Korea's exports to China fell by 19.9 percent in 2023, marking the steepest decline in four decades, according to a report released by the Korea International Trade Association (KITA) on Monday.
The trade balance with China also shifted to a deficit for the first time since 1992, reaching a record of 25 trillion won ($18.1 billion).
The report attributes this significant shift to changes in both China's trade structure and Korean companies' supply chain configurations. China has evolved from processing foreign intermediate goods to producing and exporting its own, while Korean industries have increased their reliance on imported intermediate goods, particularly from China.
KITA's analysis shows that the proportion of intermediate goods in Korea's imports from China rose from 27.3 percent in 2016 to 31.3 percent in 2023. Notably, imports of battery-related raw materials such as precursors, lithium hydroxide and cathode materials from China have surged significantly since 2017.
Despite these trends, Korean companies are beginning to diversify their supply chains. Korean firms’ manufacturing foreign direct investment into China dropped by 85 percent in the first nine months of 2023 compared to the same period of 2022, with the United States becoming the top destination for Korean overseas investments for the first time since 2000.
The KITA report recommended Korean companies diversify their export items to consumer products and expand their entry into the domestic market in China. It emphasized the need to extend their customer base to second and third-tier cities in China.
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