South Korea’s US$60 billion swing in China trade due to ‘shrinking tech advantage’ as deficit emerges
- South Korea recorded a trade deficit of US$5.1 billion with China in January and February, which was the highest among all its trading partners
- South Korea’s trade deficit with China is not a temporary phenomenon, but a structural problem as the comparative advantage of its products is disappearing, an analyst said
In just five years South Korea has gone from selling over US$55 billion more to China than it imported to recording a trade deficit of over US$5 billion at the start of 2023, with an analyst pointing to its shrinking “technological comparative advantage”.
South Korea recorded a trade deficit – meaning it imports more than it exports – of US$5.1 billion with China in January and February, which was the highest among all its trading partners, the Korea International Trade Association said on Tuesday.
This was a larger trade deficit than South Korea had with Australia – its largest coal exporter – at US$4.8 billion and Saudi Arabia – its largest crude oil exporter – at US$4.6 billion.
In contrast, the United States contributed the largest trade surplus of US$4.1 billion in the first two months of the year.
As [South Korea’s] technological comparative advantage shrinks, the deficit with China will widen. Therefore, it is very urgent to make efforts to keep the technology gap
“As [South Korea’s] technological comparative advantage shrinks, the deficit with China will widen. Therefore, it is very urgent to make efforts to keep the technology gap,” said Park Ki-soon, a senior adviser for Dentons Lee law firm.
