South Korea Export Recovery to be Sluggish Compared With Past

TRADE BALANCE - SEOUL. South Korea's exports are expected to recover going forward, but at a sluggish pace compared with the past due to a narrower gap in competitiveness against China, the central bank said in a report published on Friday.

"Even if the sluggishness of the information technology (IT) industry cycle eases from the second half of this year, exports are not expected to rebound by as much as in the past due to structural changes in the Chinese economy," the Bank of Korea (BOK) said.

The BOK said that recent weakness in China-bound exports was 35% due to structural factors such as higher competitiveness of Chinese companies, while 65% resulted from a cyclical factor of weak demand.

The estimates were based on data comparison before and after China scrapped its stringent COVID-19 lockdown measures late last year, according to the report.

Separate data showed on Friday South Korea's exports for the first 20 days of July dropped 15% over a year, after falling 6% for the whole of June.

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The data suggests that exports are due to extend their downturn this month to a tenth consecutive month, which has been mostly driven by China-bound shipments of semiconductors, and it may take some time for exports to fully get on a recovery path.

Amid divergence between weak semiconductor exports to China and strong automobile sales to the U.S. and the European Union, Asia's fourth-largest economy posted a surplus of $56.38 billion in trade of goods with the U.S. last year, far larger than the $15.06 billion with China, which had been the biggest market for years.

Exports of automobiles, mostly shipped to the U.S. and the European Union, will continue to grow gradually going forward, the BOK said in the report.