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.
