Subscribe
E-Paper
 |
By Lee Kyung-min
The impact of China's disappointing growth in the July-September period should be monitored closely by Korea, a trade-reliant economy which sends over a quarter of its exports to the world's second-largest economy, market watchers said Tuesday. China accounts for 26.1 percent of Korea's exports, a figure much higher than Korea's second-largest trading partner, the U.S., with 15 percent.
China's poor industrial output figures are feared to plunge further due to power shortages and plant operation shutdowns brought on by coal shortages, coupled with environmental curbs on heavily polluting steel and aluminum plants. Yet its exports and consumption remain strong, insulating Korea from an immediate adverse impact to a considerable degree.
Experts say Korea's exports ― a key growth driver of the economy ― remain relatively unaffected, as indicated by updates in high-frequency datasets. Korea's GDP by extension is not likely to suffer an immediate dent, they say, but complications could arise at any moment, leading to a sharp decline in growth figures.
4.9% in Q3
The National Bureau of Statistics of China said Monday (CST) that the country's GDP registered 4.9-percent year-on-year growth, undershooting forecasts by a wide margin.
The poorer-than-expected figure was due to property sector volatility from the country's largest developer, Evergrande, nearing the brink of default, exacerbated further by the fallout of factory shutdowns brought on by electricity shortages. The total industrial output regressed to the levels of early 2020, amid heavy anti-COVID-19 curbs.
"A slowdown in China's growth means Korea's exports to China decreasing as a result. The GDP figures can be adversely affected," Korea Institute for International Economic Policy (KIEP) Research Fellow Yeon Won-ho said.
Yet, the figures are not too grim upon a closer look, a reason why the China expert views fears of a China-triggered economic slowdown in Korea as overblown. "Exports and consumption in China are not bad, and the two key indicators paint a rather different picture for Korea," he said.
Final goods exports will not experience any difficulties, although intermediate goods will be subject to lingering uncertainty given the ongoing production shutdowns.
The ratio of intermediate goods to final goods was 7 to 3 in 2009, but it changed to 6 to 4 in 2019. This means less damage from China's current situation, in his view.
Consumption in the coming months will not be crimped, as inferred by the Chinese government's dual circulation strategy, a drive prioritizing domestic consumption while remaining open to global trade and investment.
"A major pillar of the strategy is bolstering domestic consumption, an initiative anchored by the importing of goods from other countries, including Korea," he said.
China's retail sales rose 4.4 percent year-on-year in September, overshooting previous market forecasts and the 2.5 percent figure a month earlier.
The world's second-largest economy has not veered off its growth path of over 6 percent this year, a target announced by Chinese Premier Li Keqiang in April, Yeon said.
"The growth figure for the first quarter was 18.3 percent and it was nearly 8 percent the following quarter. The Chinese economy faltering will not become too grave a concern."
Yi Gang, governor of the People's Bank of China, said Sunday (CST) that the economy is expected to grow 8 percent this year.
Park Chong-hoon, head of the Korea Research Team at Standard Chartered Korea, said Korea's exports remain robust, a notable feat compared to Japan, for example. Korea's overall industrial output has not experienced significant jitters, either.
"No major red flags have been raised thus far, but we will have to closely monitor the datasets that arrive in the coming weeks," he said.
