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By Anna J. Park
Korea is being advised to strengthen the diversification of its key supply chains, as the intensified rivalry between the U.S. and China is expected to negatively impact the country's core industry sectors of semiconductors and automobiles.
According to the latest policy analysis report published by the Bank of Korea (BOK) on Sunday, the geopolitical and economic feuds between the U.S. and China have deepened in more varied forms of late. This is best illustrated by their intensified confrontations on the status of Taiwan as well as the U.S.' recent passages of the CHIPS and Science Act and the Inflation Reduction Act so as to counter threats from China.
"The possibility of mitigation of the two countries' political standoff is considered to be low, given the increase of unfavorable public opinions among U.S. citizens regarding China. In addition, most pro-market and reform-minded Chinese leaders are expected to be replaced with hardline conservatives," the report stated.
The report cited a poll result by the U.S.-based Pew Research Center, which showed the percentage of U.S. citizens holding an unfavorable stance on China has surged to 82 percent in 2022, from the previous 73 percent surveyed in 2020. From 2005 right through to 2019, the percentage remained at the average of 44 percent, demonstrating a stark change in the U.S. public's perspective on China.
The BOK report went on to forecast that the conflicts between the U.S. and China will be expanded in the medium and long term, as the U.S. increases its pressure on China through the CHIPS and inflation reduction legislation. As such, these moves are expected to significantly influence the Korean economy, particularly in the chips and automobile sectors. The report advised Korean businesses and the government to come up with measures to address these problems.
"With the intensification of the two countries' conflict on the economic front over the medium and long term period, major countries are expected to strengthen their key supply chain networks. It would also be paramount for Korea to draw up balanced trade policies while strengthening industrial competitiveness through diversifying supply chains and aiming for higher value chains of key sectors," the report stressed.
