Decreasing Share in China’s Domestic Market, Red Light on Export Competitiveness

China’s importing structure is moving towards domestic consumption from processing trade. However, it appears that Korea’s competitiveness is weakening as its market share in China’s domestic market for manufactured goods declined last year. The Institute for International Trade (President, Kim Geuk-soo, htt p://iit.kita.net) of Korea International Trade Association issued a report titled “An Analysis on China’s Import Market of Manufactured Goods.” According to the report, China’s imports of manufactured products from Korea increased by 3.9 percent but the imports for domestic consumption accounted for only 1.6 percent. In addition, Korea’s share in the market dropped to 10.6 percent last year from 11.0 percent. By country, market shares of Korea (-0.4%p) and Japan (-0.6%p) declined while Taiwan (0.7%p), Germany (0.8%p) and Britain (0.3%p) did well in China’s domestic market expanding their shares.

Korea, China’s third largest importing partner of manufactured goods for domestic consumption, has lost ground in Shanghai (4th → 6th), Zhejiang Province (2nd → 3rd) and Fujian Province (4th → 6th) in terms of export ranking. Korean exporters also saw their ranking slide below top-ten in fi ve provinces out of twelve inland provinces in the Middle and Northwestern regions indicating that their exports to those areas are still behind. In addition, Korea’s market share fell in the cities such as Kunshan (Jiangsu Province), Weifang (Shandong Province) and Shenzhen (Guangdong Province) in which the imports have been dramatically increased. Also, Korean exporters’ shares in consumer goods markets in Hangzhou (Zhejiang Province), Wuhan (Hubei Province) and Shenyang (Liaoning Province) dropped and it is required for Korean companies to make active eff orts to promote exports to those regions. However, since the portion of Chinese private companies’ imports from Korea is bigger than other major countries while the imports of foreign investment companies are insignifi cant, the business network between the private companies in the two countries and the foundation for Korean companies to make inroads into China are good. Furthermore, the report states that Korea has made positive achievement in consumer goods market in China as China’s imports of consumer products (except for cars) for domestic consumption rose by 10.3 percent and Korea’s market share increased from 6.6 percent to 6.7 percent last year.

By item, it is expected that Korea’s exports will continue to expand in the markets that Korea has secured its competitiveness such as car parts, memory chips, camera modules, lithium-ion batt eries, metal machine tools, plastics, high-speed steel zinc, etc. as China’s imports of those products for domestic consumption are signifi cantly increasing. Moreover, China’s imports of consumer goods, including juicer, non-alcoholic beverages, diapers, air purifi ers and refrigerators are dramatically growing and Korea’s shares in these markets are high. Therefore, Korea will be able to expand its exports to those markets in China.

Jang Sang-shik, senior research fellow at KITA said “China’s imports of manufactured goods for domestic consumption continues to grow. In order for Korean companies to tackle the decrease in exports, they need to aggressively focus on China’s domestic market.” He also stressed “It is necessary for Korean exporters to enhance competitiveness of intermediate goods and capital goods as Korea is losing its market share in those areas, bridge the market share gap between Korea and the advanced countries in the high income cities such as Shanghai and actively make inroads into the consumption hub in the Midwest region.”

 
 
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