Chinese weak domestic demand causes S.Korean trade deficit: report

The Korea International Trade Association (KITA) has urged South Korea to develop a strategy to strengthen exports to China based on its market situation, as exports to the country have declined due to a local market downturn, the organization said on Thursday.

According to a report published by the KITA, 76.1% of Korea's exports to China were for domestic consumption in 2020, with a slowdown in local consumption causing the recent massive export slump.

The report also noted that while countries such as Malaysia and the Philippines experienced economic slumps due to a consumer spending slowdown, China is a country where an investment slump has a greater impact on the economic decline when dividing the economic factors into consumption and investment.

The KITA recommended that Korea focus on strengthening export support projects for medium and high-tech industrial products such as high-tech machinery and equipment, information and communications technology (ICT) items, and other advanced technology products, as China's import market becomes more high-value-added.

The organization further suggested that Korea expand marketing and penetration into regions where infrastructure investments are active, and should increase cooperation in areas such as hydrogen, mobility and digital fields, where Korea maintains strengths.

Due to a rapid deterioration of the trade surplus with China, Korea's export growth rate, which has supported the economy, has recorded negative growth for six consecutive months since October last year.

With exports to China plummeting, Korea now has the largest trade deficit with China, with which Korea used to have the largest trade surplus for a long time. The trade deficit with China reached $7.8 billion in the first quarter of this year, larger than the $7-billion deficit with Saudi Arabia, Korea's largest oil-importing country, according to the report.

Write to Park Han-Shin at phs@hankyung.com