An analysis suggests that as China increases its investments and exports to the ASEAN and Mexican markets, competition between South Korea and China in these markets is intensifying. As a result, this has led to calls for a sophisticated strategy that links investment and export, such as the development of industrial complexes and resource development.
According to a report released by the Korea International Trade Association’s Institute for International Trade and Commerce on the 26th, it was revealed that 40 out of the top 100 export items to ASEAN overlapped between South Korea and China last year. Similarly, in the Mexican market, 9 out of the top 30 export items from both countries were the same.
Since the imposition of Section 301 tariffs by the U.S. in 2018, China has been expanding its presence in ASEAN as an alternative production base to circumvent U.S. exports and secure supply chains. China has also increased its investments and exports to Mexico to capitalize on the U.S. near-shoring expansion and the tariff benefits provided by the U.S.-Mexico-Canada Agreement (USMCA). As a result, the number of major export items where South Korea competes with China in the ASEAN and Mexican markets has increased.
The number of items in competition between South Korea and China in the ASEAN region increased from 32 in 2018 to 40 in 2023. Among them were key South Korean export sectors such as automobiles, petrochemicals, and steel. The report analyzed that while South Korea’s share of the ASEAN import market has remained in the 7% range since 2016, China reached an all-time high of 23.9% in 2023.
In the Mexican market, the number of major export items where both countries compete increased from 7 in 2020 to 9 in 2023, and the intensity of export competition also increased from 0.315 to 0.352 during the same period. The main sectors were steel, metals, automobiles, automotive parts, petrochemicals, and wireless communications, where South Korea holds the most strength.
Therefore, the report suggested that South Korea urgently needs to develop a sophisticated export strategy that integrates investments and exports to ASEAN and Mexico. Particularly, China has been enhancing export connectivity through initiatives such as industrial complex development, resource development, and infrastructure projects in ASEAN, making it necessary for South Korea to benchmark these efforts.
The report also indicates that as China increases industrial production and foreign investment in the ASEAN market, there is an apparent increase in the re-export of intermediate and consumer goods produced in ASEAN. This is expected to make it more challenging for South Korea to export general-purpose products to China. The report emphasizes the need for South Korea to transform its future export portfolio into advanced and high-value products and to explore exports to China via ASEAN while targeting the ASEAN market.