Economic Analysis: China's Slowdown and South Korea's Trade Relations

This report examines the economic relationship between China and South Korea, focusing on the impact of China's economic slowdown on South Korea. It begins with an introduction to both countries, highlighting China's economic importance and South Korea's trade ties. The main body delves into the reasons behind China's economic slowdown, including an aging population and decreasing birth rates. It then explores the trade and investment linkages between the two nations, detailing the historical growth and current state of their economic interactions. The report analyzes the specific impacts of China's slowdown on South Korea, including effects on trade, shipping, tourism, and employment. It further examines the impact on key economic variables such as GDP, balance of payments, and employment composition. The conclusion summarizes the findings, emphasizing the interconnectedness of the two economies and the significant influence of China's economic performance on South Korea's economic health.

Business in Asia

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................7

INTRODUCTION
Asia is considered as one of the most populous and largest continent on the earth. It is
rich in resources like copper, water, petroleum etc. It consists of more than 50% population of
the world. It includes developed economies like Japan and the least developed economies like
Nepal etc. China is situated in East Asia and in year 2017 it has population nearly 1.404 billion
(Metelli and Natoli, 2017). It emerged as 'assembly center' of the production network. South
Korea is situated in East Asia and it shares militarized borders with north part of Korea. The
Essay will outline reasons behind economic slowdown of China, investment and trade relation
between China and South Korea, impact on economy of South Korea due to slowdown of
Chinese economy. It will further describe Impact on important economic variables etc.
MAIN BODY
Reasons behind slowdown of Chinese economy.
China has experienced slowdown in economy after nearly three decades. Due to the
slowdown, companies operating in manufacturing sector have experienced fall in jobs. Further,
the level of imports of goods has decreased that results in adverse impact on economies of
exporting countries. There are various reasons behind Chinese economy slowdown. It includes
increase in ageing population, decrease in birth rate, tightening of Federal Reserve etc. Rising
wage is another problem due to this, it makes China less attractive to foreign companies. Further,
rate of China growth rate become slow since double digit rate before year 2013. The export of
country fell by 4.4% in year 2018 and level of imports also decreased since 2016. (Golley, Tyers
and Zhou, 2018)
Trade and investment linkages between South Korea with China.
Development of Chinese economy during the period of boom has impact the economy of
South Korea through investment and trade. The level of Capital flows has increased between
China and South Korea in the form of direct investment. Further, China is considered as third the
largest partner of South Korea in terms of trading. From year 2001, China has once again
become top trading partner of South Korea. In terms of total trade of goods, in year 2003 China
has surpassed other countries like Japan, United States etc. In year 2005, Trading between China
and South Korea is more than $ 100.6 billion. Economic interaction between both the countries
was lead by trading activities. In year 2005, there are various types of products that are exported
by South Korea to China. It includes electronic of $ 22,297 million, chemicals of $ 11,688

million etc. Further, there are wide range of products that are exported by China to South Korea
such as Iron and steel products of $6,119 million, textiles of $4,790 million etc. Government of
China has taken various measures to increase the level of trade such as protection of intellectual
property rights, decreasing the tariffs on imports, trade rules, enhancement in integration with
international level economic rules etc. In year 2018, South Korea is at third rank in the list of
largest trading partner of China. Korea has experienced the changes in structure of exports of
food items, tobacco, crude material etc. China has exported Coal of $ 1,529 million to South
Korea in year 2005. Before 2000, companies in Korea are not considered as good in terms of
foreign investment. In recent years, Korea's rush has been seen for making investment in China.
Recently, there are various Korean companies that have made investment in China. For
example – Hyundai auto-mobiles, Samsung Electronics, LG Electronics etc. Korean companies
have exported electronic parts, materials, general machinery etc. There are small and medium
size companies that are more dynamic as compared to other large scale companies in making
investment. Investment in China has developed with the help of various factors like breakdown
of Cold War regime, cultural assimilation, geographical approximation. Further, technology in
Korea is more acceptable in market of China as compared to other countries. In year 2017, bank
of Korea announced that, direct investment in China has become almost half as compared to past
years. It was $ 1.75 billion in September 2017 (Cashin, Mohaddes and Raissi, 2017). There are
various factors that has affect investment relations such as policy developed by Chinese
Government related with foreign investment attraction. Nowadays, China is limiting the level of
Foreign direct investment in those items that requires huge consumption of energy. In year 2015,
foreign investment has increased by 5.6% in China. In past 25 yea4rs since diplomatic relations
has established between China and South Korea, volume of bilateral trade has expanded 33
times. Gap in technological advancement has decreased due to growth in Chinese industry. In the
area of trade and investment, both the countries are having large share in each other country (Irie,
2016).

China build their relationships with many nations through trading procedure, their major
trading partner nations for exports were Hong Kong, Korea, United states, Japan and Vietnam.
China has become the world's biggest economy by Gross domestic product. They successfully
developed the network of economic relations with constituting periphery and semi periphery of
world as well as industrial economies. For example, China build their trade relation with Africa,
African nations seeking funds to develop their infrastructures. They imports electrical and
mechanical goods as well as high tech products to Africa. China invest in mostly undeveloped
infrastructures of African countries. US is also stated as one of the largest trading partner of
China, United states boasts the biggest economy in world. Textile, finished goods, apparel,
machinery etc. are main goods export by China to Africa that established their trade relation
effectively. Africa on the other hand imports iron, natural resources, cotton and other things to
China that help to stronger trade relation between both countries. China exempted import tariffs
for many commodities of nations. On the other hand, China have trade relation with India, they
supply high tech quality goods.
Impact of slowdown in Chinese economy.
In general, it is very difficult to measure the amount of the impact on South Korea
economy of a China as China and South Korea are two nation which used to share a good
relation among them in past. As in the recent past Chinese economy has seen a slow down it has
created a good amount of impact on the South Korean Economy, amount of the impact on South
Korean Economy can be better understand with the simple stats that China accounts for 11.9
percent of total South Korean export in the last year (Ji, Zhang and Zhang, 2019). The main
impact which can be seen on the South Korean economy is the impact on the trade of the South
Korea as in the first quarter of year 2016 their was 13.3 percent fall in the Export of the Korea as
Slowing china has eventually slashed the spending power of South Korea’s major emerging
markets which has brought the vast impact on the trade of South Korea. As China was the South
Korea’s biggest trading partner, taking a quarter of its overseas shipments, but South Korea’s
exports to its large neighbour fell 15.8 percent in the first quartered of 2016 (Impact of China on
South Korea, 2016). The biggest impact which has been seen in the Korean economy is on a
South Korean shipbuilders and shipping companies as South Korea used to be the home for the
three biggest shipping company in the world but due to fall in the economy and trade of the
South Korea these three company has to suffered good amount of the loss in the recent past

which has eventually reduced amount of the money in the Korean economy, which eventually
has reduced the amount of the investment in the Korean economy (Huang, 2019).
Tourism of the South Korea has also seen the good amount of the impact due to the slow
down of the Chines economy as number of the people who left Korea and went to the China in
their boom period is returning back to the Korean cities in search of the opportunity which has
eventually increased the unemployment in the country and the tourism industry was one of the
most important industry which has attract the interest of the citizen toward them as in the year
2017 Tourism industry has provided employment to 9.9 percent of the total employment of the
South Korean and accounts for 10.4% of global GDP and 313 million jobs, So from the above
data it can be interoperated that the tourism industry of the South Korean has been impacted in
the positive manner due to the Slow down of the China economy (Bhardwaj and et.al., 2019)
(Impact of China on South Korea, 2016).
Impact on economic variables.
The economic variable is he measurement which helps in order to determine how the
economy is function and the major economic variable is Country's income that also affect from
the China's slowdown. For that the three additional factor impact upon the South Korea's future
economic growth. The first is General global slowdown, as China is South Korea's largest
trading partner and most of the trade is with Chin. Thus, it creates negative impact upon the
country's export. Even, as the growth of Europe and US slows and also the contracts with
Canada and South Korean parts for goods are declined. Second factor is China's ability in order
to manage the slowdown (Jin, Qu and Bao, 2019). However, the recent handling of its currency
devaluation and due to current stock market crisis also raised the concern for China's economic
management. Last factor is South Korea has a limited scope for economic growth on domestic
consumption. In addition to this, the household debt also continues to grow and even exceed
around 158 percent of disposable income. As a result, it leads Germany as another major export
driven economy.
Another variable is Balance of Payment in which the data shows that South Korea is one
of the hardest hit economies. It is so because the business in quoted country are brisk for an
impact from US tariff at China and that is why, it is consider one of the hardest hit in the world.
In addition to this, due to country's strong export orientation, the changes in economy is also

seen at globally (Xu, 2019). Therefore, due to decline in the Korea export and an increasing
slowdown broadly affected the global economy market. Therefore, this shows that china
Slowdown creates negative impact upon the South Korea's overall economic performance
The composition of employment in South Korea has also changed due to slowdown of
Chinese economy. Total employment in the country includes 3.16 million new employees, there
is decrease in employment in agricultural sector by 6,00,000 workers and reduction in
employment in manufacturing sector. It is very difficult to estimate the impact of slowdown in
economy of China in systematic manner. Efforts are made to equip students in Korea with skills
in Chinese language as a kit that helps to face the pressure from unemployment rate. There is a
need to develop growth in employment to absorb the increasing urban unemployed people.
Amount of the investment which used to be done by both the country in past was of a
good amount as in the year 2005, China has received $2.6 billion of investment from Korea and
Korea has received $13.5 billion by China but as in the recent past due to the slow down of the
China has reduced the spending power of the South Korea and also many big company is
suffering loss because of same the amount of the investment has been fallen down subsequently.
CONCLUSION
After going through the above report it has been summarized that due to various reason
like ageing population, decrease in birth rate, tightening of Federal Reserve the economy of the
China has seen a slowdown. After that the report has summarized that their was a good
relationship among the China and South Korea as they used to be the largest partner in term of
the trade. After that report summarized that due to the slowdown of the China economy their was
a huge impact on the Korea economy specially on the Trade of the South Korea. In the end
report summarized the impact on economical variable.
REFERENCES
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Sea: Implications for future air quality in South Korea. Environmental pollution.247.
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Cashin, P., Mohaddes, K. and Raissi, M., 2017. China's slowdown and global financial market
volatility: Is world growth losing out?. Emerging Markets Review. 31. pp.164-175.
Golley, J., Tyers, R. and Zhou, Y., 2018. Fertility and savings contractions in China: Long‐run
global implications. The World Economy.41(11). pp.3194-3220.

Huang, Y., 2019. US–China economic tensions: origins and global implications. China
International Strategy Review, pp.1-12.
Irie, H. and et.al.,2016. Turnaround of tropospheric nitrogen dioxide pollution trends in China,
Japan, and South Korea. Sola.12. pp.170-174.
Ji, Q., Zhang, H. Y. and Zhang, D., 2019. The impact of OPEC on East Asian oil import
security: A multidimensional analysis. Energy policy.126. pp.99-107.
Jin, X. C., Qu, M. and Bao, J., 2019. Impact of crisis events on Chinese outbound tourist flow: A
framework for post-events growth. Tourism Managemen. 74. pp.334-344.
Metelli, L. and Natoli, F., 2017. The effect of a Chinese slowdown on inflation in the euro area
and the United States. Economic Modelling. 62. pp.16-22.
Xu, X., 2019. The Slowdown of China's Economic Growth in Terms of Statistics. Frontiers of
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Online
Impact of China on South Korea. 2016. [ONLINE]. Available Through
<http://keia.org/sites/default/files/publications/09.Cheong.pdf>.