South Korea exports hit by cooling demand from China
Shipments of memory chips and other goods plunge as Beijing’s economic woes spread
South Korea’s exports fell in December in the latest sign that a slowdown in China and the fallout of the trade war between Beijing and the US are hitting other regional economies.
The country’s exports fell 1.2 per cent last month from a year earlier, missing economists’ expectations for a rise, hit by cooling demand from China and falling prices of memory chips and oil.
The volume of goods shipped to China, which takes in a quarter of South Korea’s overseas shipments, plunged nearly 14 per cent in December, compared with a near 15 per cent jump a year earlier, according to data released by Seoul’s trade ministry on Tuesday.
“We are facing tough export conditions due to the slowdown of major economies and Sino-US trade tensions,” said Sung Yun-mo, commerce minister of Asia’s fourth-largest economy.
South Korea is one of the first big economies in the region to feel the effects of the slowdown in China but other regional trading partners, from Taiwan and Japan to Australia, are also bracing for the possible shockwaves.
The US and China are Seoul’s two biggest trading partners, with South Korea exporting mostly intermediate goods used in Chinese home appliances, computers and telecoms devices.
South Korea is the world’s leading exporter of microchips, ships, cars and petroleum products. The country’s export data are seen as a bellwether for global demand as they are released earlier than most other big economies.
Shipments of semiconductors, the country’s biggest export item, slid 8.3 per cent from a year earlier as global technology companies reduced investment in data centres, prompting memory chip prices to fall in recent months.
Exports for 2018 increased 5.5 per cent compared with 15.8 per cent growth in 2017. The government expects the country’s export growth rate to slow further this year to 3.1 per cent.
South Korea has announced a string of stimulus measures, including tax cuts, to minimise the adverse impact of the global trade war and China’s slowdown.
But economists have warned that the region’s export-dependent nations are unlikely to escape the full impact, with larger collateral damage expected for countries with close ties to supply chains in China.
“The data show that our concerns over contagion have been realised,” said Lee Sang-jae, an economist at Eugene Investment & Securities. “The export contraction is unlikely to be a blip. The problem is likely to worsen next year. Other countries in the region such as Taiwan, dependent on trade with China, will also feel the pinch.”