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S. Korea's exports to China seen shrinking on structural change

All News 11:39 July 15, 2016

SEOUL, July 15 (Yonhap) -- 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 Friday, 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 (BOK), the country's exports to China are expected to shrink by an average US$5 billion per year over the next five years.

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 percent of its gross domestic product in 2020, up from 52.3 percent in 2015, the report estimates South Korea's exports to China will shrink $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 percent of the GDP from 22.1 percent 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 percent from the same period last year as its shipments to China dropped every single month, tumbling 9.4 percent 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.

BOK Gov. Lee Ju-yeol has also urged efforts to meet China's changing demand.

"The recent slump in exports is rather due to external factors than domestic issues, and I believe a drop in global trade and China's changing economic structure to one that focuses more on domestic consumption are especially having a negative impact on the country's exports," he said in a press briefing on Thursday.

"Our exports will largely depend on global economic recovery, but our companies and industrial sectors must continue their efforts to strengthen their competitiveness, while the country must also work to change its exports to China from intermediate goods to consumer goods," he added.


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