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| Containers are being unloaded at Busan Port on July 1. Yonhap |
By Kim Bo-eun
Calls are growing for Korea to diversify its trade with countries other than China, after Korea recorded three consecutive months of trade deficits with the world's No. 2 economy.
Imports from China have continued to grow, but exports to the mainland have slowed significantly, resulting in a trade deficit for Korea, for the months of May through July. It is the first time Korea recorded a trade deficit for three straight months since the establishment of diplomatic relations with China in 1992.
Korea's trade deficit came to $1.1 billion in May, $1.2 billion in June and $600 million in July, according to data from the Korea International Trade Association (KITA).
The trade surplus of display panels, petroleum products, cosmetics and chip manufacturing equipment ― major export items to China ― shrank by more than $500 million in the first half of this year.
This decrease was partly due to COVID-19 lockdowns of cities in China in the first half of the year, which resulted in shrinking demand for imports of key items. The shrink in exports was also because China began substituting Korean exports of items such as chip-making equipment with those produced in China, a KITA report issued Thursday, said.
Exports of chip manufacturing equipment to China dropped 51.9 percent in the first half of 2022 compared to a year earlier. China has been stepping up efforts to localize the production of key items, as it seeks to build the competitiveness of its semiconductor industry.
On the import side, imports of lithium hydroxide from China spiked during the same period. Lithium hydroxide is a key material for lithium batteries.
Figures show imports of the inorganic compound began surging in May when Korea's exports of electric vehicles increased. Imports of lithium hydroxide jumped 404 percent in the first half of this year from the same period of 2021. Korea relies on China for 83.2 percent of the material.
"It is essential to localize the production of or diversify importing countries for key next-generation materials, maintain a lead in core technology and also diversify exporting countries to secure a trade surplus with China," the KITA report noted.
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