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Trade of Goods between Korea and USA Soars to 169.1 Billion Dollars in 2021

June 15, 2022 by Leave a Comment
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Marking the 10th anniversary of the signing of the FTA between the two nations

This year marks the 10th anniversary of the signing of the Korea-U.S. FTA. Trade of Goods agreement in 2011 before the ratification of the bilateral FTA, which stood at US$100.8 billion, and then soared to US$169.1 billion in 2021. This shows a 67.8% increase in trade within a decade.
For the United States, Korea accounted for 9.3% of trade of goods in 2011 before the ratification of the Korea-U.S. FTA. This figure rose to 13.4% in 2021, making Korea the second-largest trading partner for the Unites States. Korea’s exports to the United States were led by automobiles, automobile parts, petroleum products, secondary cells, refrigerators and synthetic resins, resulting in US$11.6 billion worth of trade surplus for Korea before the ratification of the bilateral FTA, increasing to US$ 22.7 billion in 2021.

Korea attracts the largest size of foreign direct investment (FDI) from the United States, and at the same time, the United States is the largest investment destination for Korean companies. After the ratification of the bilateral FTA, 22.3% of FDI to Korea came from the United States and a whopping 25.2% of Korea overseas investment went to the United States. Korea’s investments in the United States dramatically increased with a bulk of investment directed to the battery, semiconductor and e-vehicle sectors, which contributed to expanding production facilities in the United States and job creation. This also proved to be an opportunity for Korea, as Korean enterprises were able to expand their markets.
The Korea-U.S. FTA as a main contributor to strengthening cooperation in the supply- chain sector between the two countries deserves to be stressed.
Taking the semiconductor industry as an example, the two countries were able to establish a strong valuechain based on each other’s respective strengths. The United States, with its excellence in semiconductor designing on top of a foundation of a stable source of investment, and Korea, with its strengths in the manufacturing sector, established a strong value chain. A similar example can be witnessed in the battery industry sector.

Korean battery production companies and the American automobile companies are engaged in joint investments. This resulted in establishing mutually beneficial cooperative relations between Korea and the United States. It enabled Korean companies to gain a competitive edge compared to other rival countries by securing large-scale clients in advance and allowed American automobile companies to secure a stable source of battery supply.
Aside from these examples, bilateral cooperation based on the contract manufacturing organization (CMO) of medicine and medical supplies amid the Covid pandemic developed into a vaccine alliance, which is seen as another example of solidifying the supply chain.
The report released by the Korea Institute for International Trade (KITA) says, “Based on a stronger cooperative economic partnership with the signing of the Korea-U.S. FTA and expanded trade and investment, Korea rose to become a core partner in terms of supply chain for the United States.” It also added, “A strengthened cooperation in the supply chain sector between Korea and the United States is becoming ever more apparent, especially in core industry sectors, including the semiconductor, battery and pharmaceutical product sectors. The reorganization of supply chain based on mutual trust is gaining greater attention as the two countries experienced a series of supply chain crises triggered by the confrontation between the USA and China and the Covid pandemic.”
Yu-jin Lee, the head researcher at KITA, forecasted, “Future trade agreements will go beyond allowing greater access to each other’s markets and will focus on solidifying alliance from the perspective of economic security.” The researcher also said, “The United States is recently stressing solidarity with its allies and partners as the United States proposes the Indo-Pacific Economic Framework (IPEF). Korea should thus consider ways on how it can utilize the cooperative relationship between Korea and the United States made possible by the FTA between the two countries, and link it with discussions on new regional economic security alliance.” <Source: KITA>

 
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S. Korea’s Trade Surplus with the United States

April 23, 2019 by Leave a Comment

https://korean-machinery.com///inquirySouth Korea’s recent trade surplus with the United States declined amid the surge in oil and gas imports from the United States in order to stave off the issue of Korea’s balance of trade issue with the world’s largest economy.
According to the latest data from the Ministry of Trade, Industry and Energy (MOTIE), the nation’s trade surplus with the United States decreased 22.9 percent to $13.8 billion in 2018 from a year ago, even though the bilateral trade increased 10.3 percent to a record high of $131.6 billion.
In the past year, S. Korea’s exports to the United States reached $72.7 billion, up 6.0 percent, which means that it is faster than the country’s overall annual exports gain of 5.4 percent in the year. For some major export players, shipment of semiconductors jumped 90.6 percent, machinery, up 32.4 percent, while petroleum products rose by 15.7 percent.
Auto exports to the United States, meanwhile, decreased 6.9 percent compared with a year earlier. Exports of mobile devices and rubber products fell by 6.2 percent and 2.2 percent, respectively.
The remaining export items from Korea comprised 2.9 percent of the U.S. market in 2018, remaining at an unchanged level over the past four years.
Korea’s imports from the United States grew by 16.2 percent year-on-year to $58.9 billion last year, mainly because of a sharp jump in energy imports to reduce the strong, consistent pressure from the Trump administration.
Last year, Korea’s imports of U.S crude oil skyrocked 520.1 percent compared with the previous year, natural gas by 179.2 percent, and liquefied petroleum gas by 50.3 percent. The global giant economy’s market share in the nation’s energy market reached 11.0 percent, outdoing Japan to become No. 2 seller.
The service area imports between the two countries rose by 7.2 percent year-on-year to $45.2 billion in 2017, the latest comparative data showed. S. Korea’s service exports in 2017 amounted to $14.9 billion, slightly up from $14.6 billion in 2016. Service imports from the United States expanded 10.3 percent year-on-year to $31.3 billion over the same period.
S. Korea’s service trade deficit with the United States grew in 2017 to reach $16.3 billion, and the deficit has increased 20.6 percent on average from 2012 to 2017.

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Semiconductors, Ships, and Petrochemicals Leading This Year’s Anticipated Three Percent Export Growth

January 25, 2019 by Leave a Comment

https://korean-machinery.com///inquiryFor S. Korea’s exports in 2019, the trend is expected to be sluggish and within a narrow range when compared to last year. This is due to a series of negative factors including trade conflict between the United States and China, a rise in interest rates by the United States, the possibility of financial crises in developing nations, etc., in spite of the gradual growth trend of global economy and a steady global demand on IT.
The nation’s exports and imports in 2019 are expected to rise by 0.3 percent to US$625 billion and 3.7 percent rise to US$557 billion, from last year, respectively, accomplishing US$1 trillion in trade for three years in a row.
By item, exports of semiconductors are expected to reach US$130 billion, the nation’s first among single items, spurred by the demand increase for the servers of data centers and the new market growth including artificial intelligence (AI), Internet of Things (IoT), and self-driving automobiles.
The export increase rate of semiconductors is, however, expected to be much more sluggish, from the thirties last year to five percent this year, caused by the decrease of semiconductors’ unit costs. The export increase rate of ships is predicted to reach 10 percent thanks to the delivery of orders received over the past two years and the base effect. Petrochemicals are anticipated to see a 5.2 percent increase in exports with the help of the increase of export volume by the operation of the domestic new facilities.
Moreover, general machinery and computers are also expected to enjoy increased export volume, due to the investment increase in infrastructure in major nations including China, the United States, and India and the increased demand for SSD used in cloud servers for enterprises and personal PCs, respectively.
For automobiles, exports are expected to reach the record levels of last year, due to the potential financial crises in developing nations affected by the rise in interest rates, in spite of some positive factors including the release of some new car models, the increased demand for some eco-friendly cars and SUVs. The export of display is expected to decrease to 2.2 percent, caused by the decrease in price affected by the oversupply of liquid crystal display (LCD) taking 60 percent of the whole, despite the anticipated upswing in the demand for organic light emitting diode (OLED).
For wireless communication devices and home appliances, the decrease trend of exports is expected to continue. As for steel, the decreased trend is expected to expand, caused by some factors including the restriction of exports by the United States.

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ASEAN, Rising as a Promising Export Market for New Industries, Parts, and Materials

November 27, 2018 by Leave a Comment

https://korean-machinery.com///inquiryASEAN has a population of 640 million, 12.5 times the population of Korea. The GDP growth rate of ASEAN from 2009 to 2017 is almost 5%. The proportion of the Korean exports to the Big 4 markets (China, U.S., EU and Japan) was 50.8% in 2017, decreased from 56.6% of 2007. On the other hand, the proportion of export to ASEAN increased from 10.4% to 16.6%.
ASEAN countries are rising as promising areas for export of new industrial products and parts/materials as they are intensively fostering the high-tech products, and the parts and materials industry of Korea.
In ‘Export Opportunities and Promising Items for ASEAN,’ which was presented by the Institute for International Trade of the Korea International Trade Association, electrical machines and parts in the field of new industry, machines and parts in the field of optical instruments, and parts, copper and aluminum materials, etc. are items expected to be exported to the ASEAN may be significantly more.
Increase of the local market share and stabilization of import demand, especially focusing on electric condensers, telephones, microphones, and printed circuits in the field of electrical equipment, reflectors, liquid crystal devices and laser equipment among optical instruments, and processing/crafting machines, machining centers for metal processing, and cold- formed processing machines in the machinery field are expected to help exports.
This report said that
“while the entire exports of Korea in the last year increased 1.6 times from 2009, the entire exports of ASEAN increased almost 2.3 times. Among them, exports to Vietnam, Indonesia, Myanmar (VIM), and Philippines (VIP) which have strong growth potentials increased 4.2 times and 3.8 times, respectively.”
It also added that “looking at it by item, exports of the new industry, including next-generation semiconductors, displays, high-tech new materials, etc., to ASEAN, VIM and VIP increased 3 times, 15 times, and 6.4 times, respectively. Korean companies evaluated Vietnam and Indonesia most highly in terms of export potential and investment advancement in the survey of the Korea International Trade Association.”
Jung, Gwi-il, a researcher of the Trend Analysis Center of the Korea International Trade Association emphasized that “the major countries of ASEAN have huge potential for the population and economic growth rate and are expanding political support for the industry of high-tech and parts and materials. Korean companies should realize ASEAN as a promising market for export of higher value-added items and accordingly, aggressively attack their markets based on the new industry and the field of parts and materials.”

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Production and Exports of Car

October 25, 2018 by Leave a Comment

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Increased by 8.1% and 2.1%, respectively in August, compared with the same period of the previous year

 

Production, export and domestic sales of South Korea’s finished vehicles all increased, together with export of auto parts.
According to ‘On Domestic Auto Industry of August’ issued by the Ministry of Trade, Industry and Energy, production, export and domestic sales of the finished vehicles increased by 8.1%, 2.1% and 5.0% respectively compared with the same period of the previous year, and export of car parts also increased by 0.5%.
Major finished vehicle companies produced 296,471 vehicles, increased by 8.1% compared with the same period of the previous year, due to early pay settlement, recovery of domestic sales and export, etc.
In addition, exports recorded 174,869 vehicles, increased by 2.1% compared with the same period of the previous year, due to full-scale export expansion of new sports utility vehicles (SUVs) and increase of exports to the Middle East and the European region. In terms of the amount, exports recorded US$28.5 billion, an increased of 0.5%.


Domestic sales of vehicles turned up to be 146,086 units, increased by 5.0% compared with the same period of the previous year, due to implementation of the individual consumption tax reduction to passenger cars and new SUVs (Carnival and Santa Fe). Related to this, sales of domestic cars and imported cars increased by 4.1% to 125,289 units and by 11.2% to 20,797 units respectively.
Especially, in the case of eco-friendly cars, domestic sales of electric cars increased drastically, amounting to 8,640 units, an increase of 9.5% compared with the same period of the previous year. Among them, the hybrid cars and electric vehicles accounted for 6,572 units (up 3.6%) and 1,971 units (up 31.5%), respectively.
The domestic sales volume of major electric cars last month comprised 648 units of ‘Kona EV,’ 399 units of ‘Soul EV,’ and 631 units of ‘Volt EV.’
Exports of these cars also increased by 25.7% compared with the same period of the previous year, recording 15,926 units. Among them, the numbers of hybrid cars and electric cars sold were 11,650 units (up 17.3%) and 2,731 units (up 153.3%), respectively, thanks to the good performance of Hyundai Motor’s Ionic hybrid and electric car models.
Meanwhile, export of auto parts last month recorded US$1.87 billion, an increase of 0.5% compared with the same period of the previous year, due to expansion of exports to North America and the European region despite decrease of exports to Asia and Europe.

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The Production and Export of Automobiles on the Decline are Decreased

July 26, 2018 by Leave a Comment

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Export of eco-friendly vehicles and SUV with high unit prices increased.

 

South Korea’s domestic automobile industry has diminished its decline since February, although both production and exports have decreased in terms of vehicle numbers.
In May, exports of both automobiles (1.9%) and auto parts (14.7%) increased YoY in terms of the amount due to export increase of eco-friendly cars and SUVs with high unit prices and export increase of auto parts to the US and China.
Only 354,595 cars were produced in May, 1.3% less annually, due to discontinued production of some models, decrease of domestic sales and exports of domestic cars. Sales of domestic cars decreased slightly but, due to increase of imported car sales, total domestic sales recorded 157,771 units, increased by 1.3% YoY.
During this period, automobile production was only 354,595 units, decreased by 1.3% YoY, due to overseas inventory adjustments, discontinued production of some models, and decrease of domestic sales and exports of domestic cars. The models that were discontinued in February were Cruze and Orlando.
Hyundai Motor’s production dropped by 4.3% YoY due to production adjustments caused by sluggish exports of some models despite the increase in domestic sales, mainly in SUVs (Santa Fe, Kona).
Kia Motor’s production increased by 7.0% YoY on the strength of the effect from new cars such as K3, K9, and Carnival (including partial changes). In case of GM Korea, production decreased by 14.4% YoY due to discontinued production of Gunsan Factory coupled with slump of domestic sales and exports.
Ssangyong’s production jumped by 9.4% YoY thanks to the domestic sales effect of the new car Rexton Sports(pickup) released early this year. On the other hand, Renault Samsung’s production fell by 4.9% YoY due to sluggish domestic demand and exports of SM6.

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Machinery Drives Export

July 17, 2018 by Leave a Comment

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Even though two main export items are excluded, it is possible to maintain upbeat due to construction machinery which is proving to be competitive.

When we worry about the Korean economy, the words not removed at all are ‘the phenomenon of semiconductors’ sole lead.’ However, exports of May relieved such worries. Export growth rate increased by 12.5% YoY excluding shipbuilding and semiconductors (Excluding these two items, daily average export increased by 10%.).
It is machinery that drives export expansion following semiconductors, chemicals and oil refining. Machinery exports in May increased by 15.8% YoY, marking double-digit growth for two consecutive months following April (13.1% YoY). In particular, construction machinery is proving to be outstanding.
Experts predict that construction machinery exports will expand continuously. There are three reasons for such expansion of export:s First, the home ownership rate in the USA has rebounded in almost a decade. The actual demand seems to increase mainly among people in their 20s and 30s. In this process, the speed of new home sales growth is faster than that of the existing ones.
In addition, it was confirmed at the beginning of the year that the growth of housing transaction volume rebounded in China. Although the liquidity growth rate in the market is falling, the real estate market is by contrast improving.
Also, construction machinery exports have become more diversified. Exports of construction machinery increased in India and Eastern Europe as well as the USA and China.
Although the export growth rate is expected to decline in July and September due to the base effect, the overall export trend is positive in the second half of the year. Daily average exports excluding shipbuilding are on the rise, and daily average exports excluding shipbuilding and semiconductors reached the top of the graph.
Mr. Ahn Ki-tae, a researcher of NH Investment & Securities, said, “Since Korea is not a country with strong brand power in the consumer goods sector like Switzerland, so it tends to benefit from massive orders in developed countries. The pattern is that the global order increases when the inventory of manufacturing industry in the USA decreases and, in that context, Korea’s exports increase with a time lag.”
According to his explanation, the inventory ratio (inventory-to-sales ratio) of the U.S. manufacturing industry increased in early 2014, and Korea’s exports declined from the end of the year. On the contrary, the inventory ratio of the U.S. manufacturing industry decreased in early 2016, and Korea’s exports increased from the end of the year. There was a time lag of about one year.
Researcher Ahn added, “As the inventory ratio of the U.S. manufacturing industry is still on a downward trend, I maintain a positive outlook on Korea’s exports.”

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Korea-U.S. FTA Revision Negotiation

May 29, 2018 by Leave a Comment

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Extension of Tariff Elimination on Freight Automobile Exports up to 20 Years·Exemption from Tariffs on Steel under Article 232

 

The negotiations for the revision of the Korea-U.S. FTA have been concluded under a cloud of great concern among the entire nation. Although the final procedures are still under way, it has been resolved in effect. The United States has decided to exempt
Korea from tariffs on steel and aluminum products under Article 232 of the Trade Expansion Act, and Korea has decided to extend tariff elimination on freight automobile exports and to lower the automobile safety and environmental standards.
The two countries agreed to exempt Korea from tariffs on steel products under Article 232 of the Trade Expansion Act. Meanwhile, Korea’s steel exports to the United States were set to a quota of 74% compared to the previous year, which corresponds to an average export volume of 3.83 million tons for the period from 2015 to 2017.
The Ministry of Trade & Industry (MOTIE) estimated that the uncertainty of Korean companies was eliminated by securing 74% of exports to the USA last year without additional 25% tariffs, with the early exemption of Korea.
Boards, one of the nation’s main export items, in particular, secured a quota of 111 % compared to the previous year, yet the quota on steel pipes, such as oil country tubular goods (OCTG), was confirmed at 1,040,000 tons.
Accordingly, MOTIE expected a significant decrease compared to last year’s exports of 203 million tons and stated that it would plan to draw up measures to reduce damages including diversification of exports and boosting domestic demand. Talks on steel products are scheduled to commence on May 1.
South Korea also pushed on its concerns through the amendment of the agreement in the field of investor-state dispute settlement (ISDS) and trade remedies through a revised agreement. In regard to the ISDS, it incorporates factors related to the prevention of investors’ abusive litigations and the government’s legitimate policy mandates and has decided to ensure transparency in trade remedies.
It also announced that the uncertainty has been removed by revising the rules of origin standards for some textile items and achieving a position on the further opening of the agricultural and livestock market, a core sensitive area of the country, and the use of U.S.-made auto parts.
On the other hand, instead of obtaining steel, agricultural products, and ISDS, it was decided to step back in the automotive field. Korea has extended the tariff elimination on freight automobile exports to the USA from 2021, the tenth year, up to 20 years until 2041.
In addition, provided that a company complies with American automobile safety standards up to 50,000 units per year, it will be regarded as compliant with the safety standards of Korea, and the detailed test procedures and methods of gasoline vehicles using exhaust gas will be acknowledged alongside.

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The big three Korean shipbuilders have won orders worth a total of US$6 billion in 1Q 2018

May 18, 2018 by Leave a Comment

https://korean-machinery.com///inquiryThe big three Korean shipbuilders – Hyundai Heavy Industries, Samsung Heavy Industries, and Daewoo Shipbuilding & Marine Engineering – have reportedly won a total of US$ 6 billion in the first quarter alone in 2018, reaching 20% of this year’s sales goal. Accordingly, it is expected that 1Q 2018 sales, which are slightly below expectations, are likely to be nothing more than growing pains and will lead to sales growth in the second quarter.
Combined sales of the Big Three are estimated to have fallen 41% YoY to KRW 5.6 trillion, and the operating loss to KRW 150bn, falling below the projected operating loss of KRW 35bn. This is largely due to a further drop in profitability due to the stronger Korean won.
Meanwhile, Daewoo Shipbuilding & Marine Engineering and Hyundai Mipo Dockyard expect a surplus since their sales declines are relatively small.
In 4Q 2017, the Big Three reflected provisioning for new construction orders as much as changes in the exchange rate of 8%. Provision for construction losses is generally reconciled on the deficit project. Hyundai Heavy Industries Group received a total of US$3.5bn in the fourth quarter, reflecting a provisioning loss of KRW
310bn, which corresponds to an 8% drop in the KRW/USD rate.
Likewise for Samsung Heavy Industries and DSME, the 1Q 2018 KRW/USD rate is not much different from 4Q, while the rise in the cost of the vessels is only 3 to 4%. In order to offset the KRW depreciation, it is necessary to raise COGS by more than 8% which is fallen short of. Therefore, it is estimated that the amount of construction received in 2018 will reflect a provisional loss of about 5%.
It is expected that shipbuilding prices will pick up from Q2 and profitability will improve with lower fixed cost burdens and lower possibility of provisioning for construction losses, thus causing a sales rise. Assuming such an optimistic scenario, if the KRW depreciates, the existing provision for losses on construction will be reversed.
On the other hand, the improvement in orders that began this year is largely driven by the popularity of LNG carriers. Daewoo Shipbuilding & Marine Engineering won eight orders out of the 13 orders received by the Big Three. Hyundai Heavy Industries and Samsung Heavy Industries followed by winning three and two orders respectively. Considering that the total order volume of LNG carriers last year was 14, the boom in this sector is becoming more evident than ever.
Apart from LNG carriers, orders for mid- to large-sized feeders and container vessels are also noticeable. Container shipbuilding orders are on the rise for the following reasons: the increase in freight volume has exceeded the fleet growth rate from 2017; the Panama Canal has been expanded to accommodate 14,000 TEU-class container ships; and due to the increased demand for new shipbuilding orders because of stricter environmental regulations.

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Eight New Industries Emerge as Export Growth Engines

March 28, 2018 by Leave a Comment

https://korean-machinery.com///inquiryThe eight new industries related to the 4th Industrial Revolution, such as robots and electric vehicles, are emerging as new export growth engines of Korea, while contributing to an increase in jobs.
According to the report, “Trend Analysis of Job Creation in the Eight Emerging Export Industries and Trade with China” published by the Institute for International Trade (IIT) of the Korea International Trade Association (KITA), exports of the eight emerging industries in Korea have increased from an average of US$47.8 billion in 2014 to US$73.6 billion in 2017. The share of total exports rose from 8.3% to 12.8%. In particular, exports of the eight emerging industries increased by 27.7 percent last year, creating 415,000 jobs.
The figures for employment inducement per US$ million of exports also increased considerably from 5.16 persons in 2014 to 5.63 persons in 2017. The largest employment inducement figure was recorded in the next-generation semiconductor sector, while the robot industry was found most effective in inducing employment. The employment inducement figures were the largest in the next-generation semiconductor sector (188,000), followed by nextgeneration display (8.0 million), new energy (4.5 million) and bio-health (4.3 million) in 2017. Inducement per US$ million of exports varied relatively largely ranging from 10.7 in the robot sector, 9.7 for electric cars, 9.4 for bio-health, and 8.7 for nextgeneration display in 2017.
Last year, exports of the new industries have shown outstanding results in all the eight sectors and major regions of the world except Japan.
By sectors, exports of electric vehicles (186.8%), aerospace (37.3%), robots (36.2%), next-generation displays (34.4%), next-generation semiconductors (27.1%), new energy products (23.7%), high-tech materials (15.2%), and bio-health goods (13.7%) have grown in more than double-digit figures. Among the developed countries, on the other hand, the USA (29.2%), the EU (34.6%), and Vietnam (87.8%), which are emerging as overseas production bases for Korean companies among rising countries, have increased their exports to ASEAN nations (48.5%) and India.
Exports of the eight new industries to China grew at a CAGR of 5.2% from US$ 17.4 billion in 2014 to US$ 20.3 billion in 2017. Revenues for the same period increased by an annual average of 24.6%, from US$ 3.9 billion to US$ 7.5 billion. The increase in imports outstripped the growth in exports. This reflects China’s relentless pursuit in the new industries.
Exports of new industries to China amounted to 27.6% in 2017, which was 2.8% higher compared to exports of all sectors to China (24.8%). In particular, the dependence on exports of next-generation displays (37.6%), advanced materials (36.0%) and nextgeneration semiconductors (29.8%) to China turned higher than 30%, underscoring an urgent need for market diversification.
“Nurturing the new industries requires a management strategy aimed at overseas markets that can manifest the scale-oriented economy from the earliest stages,” said Moon Byung-gi, a researcher at the IIT of KITA. “In order for the new industry to continue to grow and create employment, It is necessary to establish a system for effective cooperation and division of labor such as joint investment and technical cooperation between Korea and China along with the development of composite materials, parts and products matching with the trend of the 4th Industrial Revolution.”

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