Emergence Of China And The Economy Of South Korea

Abstract

The emergence of China as a major player in the global economy has had many consequences for the economy of South Korea and has serious implications for that country’s future prospects and economic relationship with China. This paper examines the changes in the export structure of the two economies that have taken place since the establishment of formal diplomatic relations in 1987 and their effect on the South Korean economy. It specifically examines whether the rise of China and its ‘catching-up’ with Korea has caused the ‘hollowing out’ of Korea’s corporate sector. China is now the most important destination for Korean exports and a major supplier of its imports. While it has become a serious challenger of South Korea in world markets for manufacturing exports, China is now an important bilateral trade partner for the country. Furthermore, South Korea has become an important parts supplier for China’s manufacturing firms and has thus indirectly benefited from the growth of China’s manufacturing exports. The growing bilateral trade and deepening of production networks may be taken as a sign of growing economic interdependence of the two economies.