World Economy

S. Korea Exports to China Shrinking

S. Korea Exports to China ShrinkingS. Korea Exports to China Shrinking

South Korea’s exports to China will continue to decline partly due to a change in China’s economic structure, a central bank report said, pointing to a need to adjust the country’s own economic structure to meet changing demands in the world’s second-largest economy.

According to the report from the Bank of Korea, the country’s exports to China are expected to shrink by an average $5 billion per year over the next five years, Yonhap reported.

Such an outlook comes as China is increasingly focusing on its domestic market as a source of growth.

Assuming China’s domestic consumption will continue to grow, accounting for 57.3% of its gross domestic product in 2020, up from 52.3% in 2015, the report estimates South Korea’s exports to China will shrink by $23 billion over the 2016-2020 period.

An additional $2 billion will be lost in shipments to third countries via China over the cited period as China’s own exports are expected to shrink to 20.1% of the GDP from 22.1% in 2015, the report said.

The anticipated cut in shipments to China raises alarm for South Korea as China is the world’s largest importer of South Korean goods, meaning a drop in shipments to China may hurt the country’s overall exports.

In the first six months of the year, South Korea’s total exports plunged 10% from the same period last year as its shipments to China dropped every single month, tumbling 9.4% on-year in June alone, the trade ministry said earlier.

“The country must actively seek to explore China’s fast growing consumer market that will increasingly make up a greater part of China’s economy,” the report said.