韩国央行-考虑供应链联系的韩国对华出口评估及启示（英）

Ⅱ.KeyIssues

[August2024KoreaEconomicOutlook]

AssessmentandImplicationsofKorea’sExportstoChinaConsideringsupplyChainLinkages

MacroeconomicAnalysisTeam,ResearchDepartmentSunyoungJung,DongjaeJung,JoonChoi,ByeongtakAhn,andGyuhwanLee1

Contents

Background

CharacteristicsofTradewithChinainTermsofProductionLinkage

FactorsofChangeinExport-LinkedProductiontoChina

ConclusionandImplications

1FormermemberofMacroeconomicAnalysisTeam

1

AssessmentandImplicationsofKorea’sExportstoChinaConsideringsupplyChainLinkages

KEYTAKEAWAYS

I.Sincethemid-2010s,KoreanexportstoChinahavedecelerated,culminatinginatrade

deficitlastyear.ThisshiftindicatesasignificanttransformationofKorea’stradedynamicswithChina.Withover80%ofKoreanexportstoChinacomprisingintermediategoodsusedinChina’sproductionprocesses,itisessentialtoexaminetheshiftsinproductionconnectivitybetweenthetwocountriestofullyunderstandtherecentchangesintheirtradestructure.

II.Korea’s“export-linkedproduction”*toChinahasincreasedbyapproximately1.3%of

GDPannuallysince2000,demonstratingsolidgrowthevenduringthemid-2010s,whenexportsstalled.**

*Export-linkedproductionreferstooverseasproductionexposureontheexportsideasdefinedintheOECDICIOtables.Itencompassesintermediategoodsatallstages,producedinKoreaforfinalproductionwithinChina(OECD2024).

**AlthoughtheshareofexportstoChinaofKorea’sGDPincreasedmodestlyfrom11.4%in2010to11.9%in2020,theshareofexport-linkedproductiontoChinagrewsteadilyfrom15%to17%.

III.Theseflowsareanalyzedbasedon:①demandinChinaandglobally(restoftheworld)

and②changesinproductionstructureduetoChina’sincreasedtechnologicalcompetitiveness.

①ChineseandglobaldemandsignificantlyboostedKorea’sexport-linkedproductionuntil2010,drivenbyChina’srapideconomicgrowth.Sincethen,however,thepositiveimpacthasgraduallydeclined.

②Ontheotherhand,changesinproductionstructure(inducementcoefficient),reflectingChina’sincreasedcompetitivenessinintermediategoods,havecontinuouslyreducedKorea’sexport-linkedproductiontoChinasince2005.

.Byindustry,thestructuralcomponentofexport-linkedproductiontoChinahasdecreasedsignificantlyovertime:textilesandclothing(sincethelate1990s)→chemicals,steel,andmetal(sincethemid-2000s)→oilrefining(sincethe2010s)→IT*(since2018).

*Manufacturingofsemiconductor,computer,andelectronicproducts(C26inOECD)

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→Since2010,export-linkedproductionhasincreasedbyanannualaverageof0.9%of

GDP.Thisgrowthappearstobedrivenbya1.6%increaseduetofavorabledemand,whichhasmorethanoffsetthe0.7%declineresultingfromchangesinproductionstructure.

IV.Recently,theU.S.-Chinatradedisputehas:negativelyimpactedglobaldemandfor

Chineseproductsandalteredproductionstructure.ThesedevelopmentsappeartobeadditionalfactorscontributingtothecontractionofKoreanexportsandexport-linkedproductiontoChina.

V.WithKoreanexportstoChinarecoveringsincethesecondhalfoflastyear,therecovery

oftheChineseeconomyisexpectedtopositivelyimpactexport-linkedproductiondueto

①increaseddemand.However,thefavorabletrendsobservedinthepastareunlikelyto

return,asnegativefactorsrelatedto②changesinproductionstructurepersist.GivenChina’sincreasingself-relianceinadvancedtechnology,itisimportantforKoreanindustriestoadvancethroughtechnologicalinnovation.

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I.Background

1.Since2000,KoreahassignificantlyexpandeditsbilateraltradewithChinabyintegratingitsproductionactivitieswiththoseofChinathroughglobalvaluechains.Intheearlyphase,KoreaexportedpartstoChina,wheretheywereassembledintofinalproductsforglobalexportunderaverticalspecializationmodel.Overtime,ChinahasgraduallyincreaseditsexportsofintermediategoodstoKorea.Duringthisprocess,bilateraltrade,particularlyintheelectric,electronic,andchemicalindustries,increasedsharply.TheseexportsmadesubstantialcontributionstoKorea’seconomicgrowth.2

2.Forthepast20years,ChinahasbeenKorea’slargestexportmarket,consistentlygeneratingatradesurplus.Recently,however,Korea’sexportstoChinaandthetradebalancebetweenthetwohavebeenrapidlydeclining.Specifically,thegrowthofexportstoChinahasstalledsincethemid-2010sanddeclinedsignificantlyrecently,whileimportsfromChinahavecontinuedtorise.Asaresult,thetradesurplushasgraduallynarrowed,culminatinginadeficitlastyearforthefirsttimesincetheestablishmentofdiplomaticrelationswithChina.Notably,Korea’sexportstotheUnitedStateshaverisendramaticallyrecentlyandmaysurpassitsexportstoChinaforthefirsttimein21years.3Thesechangesseemtoresultfromacombinationoflong-termfactors,suchasChina’sincreasedindustrialcompetitivenessandweakeningproductionlinkagebetweenKoreaandChinaduetothedeepeningU.S.-Chinaconflict,aswellasshort-termfactors,suchassluggishdomesticdemandinChina.ThispaperanalyzesthecausesofthesechangesintradewithChinaintermsofproductionlinkageswithinglobalvaluechains.Italsoprovidesanempiricalexaminationofeachfactortoderivepolicyimplications.

TradebalancewithChinashiftedtoadeficitlastyear

Figure1.ExportsandimportswithChina

andtradebalance

Note:1)Figuresfor2024areestimatedusingtheproportion(basedonaverageoflast10years)ofthevaluesforJanuarythroughJulytoannualvalues.

Source:KoreaCustomsService.

ExportstotheU.S.haverecentlyshownsignsofexceedingexportstoChina

Figure2.SharesofexportswiththeU.S.and

China1)

Note:1)Figuresfor2024arebasedontheperiodof

JanuarythroughJuly.Source:KoreaCustomsService.

2

GDPgrowthratesandcontributionofexports(%,%p):

2000s

2010s

2020-2023

Korea

4.4(3.1)

3.5(2.0)

2.0(1.6)

China

10.6(3.8)

7.7(1.2)

4.7(1.4)

3ForthestatusofexportstotheU.S.andfactorscontributingtotheincrease,referto“AssessmentofChangesintheStructureofKorea’sExportstotheUnitedStatesandProspects”(BOKIssueNoteNo.2024-9).

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Ⅱ.CharacteristicsofTradewithChinainTermsofProductionLinkage

3.AsforKorea’sexportstoChina,semiconductorexportshavebeenfavorablesincethemid-2010s,butinotherindustries,demandforKorea’sintermediategoodshasbeendeclining.Theproportionofintermediategoods,suchassemi-finishedproductsandparts,ofKorea’sexportstoChinahasconsistentlyhoveredover80%.4However,exportsinindustriesotherthansemiconductorshavedecreasedsincepeakingin2014,contributingtoadownwardtrendinoverallexportstoChina.ThisisduetoChina’sgradualimprovementinitsowntechnology,leadingtolocalproductsreplacingimportsfromKoreaorbeingexportedtoKorea.Forexample,displaysusedtoaccountfor20%ofKorea’sexportstoChina.However,asChina’stechnologicalcapabilitiesrapidlycaughtup,Korea’sexportcompetitivenessinthisindustryweakenedsignificantly.LocalproductionofautomobilesinChinafellsharply,leadingtoashrinkageinexportsofautomotiveparts.Additionally,exportsofdiscretesemiconductorcomponents,suchastransistors,toChinadroppedsubstantially,whileimportsrose.5

Highershareofexportsrelatedtoproduction

Figure3.Shareofexportsby

stageofprocessing

Notes:1)Basedon2023.

2)ClassificationbyBroadEconomicCategoriesRev.5(BEC5).

Source:KoreaInternationalTrade

Association.

Exportsotherthansemiconductorshavedeclinedsincethe2010s

Figure4.ExportstoChina:Semiconductorsandothers

Notes:1)Figuresfor2024are

estimatedbyapplyingtheyear-over-yeargrowthratefromJanuarytoJulytotheannualvalueof2023.

2)Intermediategoodsaccount

formostsemiconductors.Source:KoreaCustomsService.

ExportsofdisplaystoChinafelldramatically,ledbyLCDs

Figure5.Exportsofdisplaysby

country

Source:KoreaCustomsService.

4.However,thespecializationofproductionwithChinamayincludeexportactivitiesthatarenotdirectlyshown.Forexample,thespecializationofproductionbetweenKoreaandChinatakesplacethroughtradewithproductionbasesoperatedbyKoreancompaniesinthirdcountries,inadditiontothetradeofintermediategoods.Inaddition,someintermediategoodsundergofurtherprocessingthroughdomestictransactionsbeforebeingexportedtoChina.Therefore,theproductionofintermediategoodsthatgothroughthirdcountriesorarere-inputsfordomesticproductionbeforebeingusedtoproducefinalgoodsinChinaarenotcurrentlycapturedintheexportstatisticsbutcanbeconsideredas“export-linkedproduction”or

4Ifcapitalgoodsamongfinalgoodsareincluded,theshareofintermediategoodsandcapitalgoodsreached91%asof2023.

5Automotivepartsexports(USD0.1billion):39.6in2010→67.1in2014→21.8in2019→12.8in2023Otherdiscretesemiconductorcomponents(USD0.1billion):

Exports:22.1in2010→22.3in2015→14.4in2019→10.2in2023Imports:14.9in2010→19.0in2015→20.0in2019→18.9in2023

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indirectexportactivities.ThisperspectivecanbeusefulforcomprehensivelyunderstandingtheKoreaneconomy’srelianceonexportsintheeventofglobalsupplychaindisruptions.6

5.IftheproductionlinkagewithChinainglobalsupplychainsisconsidered,China’sshareofdomesticexport-relatedproductionactivitiesisactuallyhigherthanwhatisreflectedintheexportstatistics.AccordingtotheOECDICIOtables,China’sshareofKorea’sgrossexport-linkedproductionactivitiesishigherthanfordirectexports(Figure6).7Forexample,whileChina’sshareofexportsin2020was25%,itsshareofthedomesticproductionofintermediategoodsforexportwas35%.8

6.WhileChina’sshareoftotalexportsremainedaround24%inthe2010s,itsshareofexport-linkedproductionclimbedsteadilybeforeshowingastabletrendandthencontractingsignificantlyfrom2022,alongwithexports.9Thewideninggapbetweenthetwoindicatorsintheearly2010ssuggeststhattraditionalexportstoChinamayhaveshiftedtoindirectexportsviaASEANcountriesasKoreanenterprisespenetratedthesemarkets.10Inaddition,duringthemid-2010s,China’sshareofexport-linkedproductionremainedrelativelystabledespitesluggishexportstoChinaamidChina’seconomicdownturnandthedeploymentoftheTHAADmissilesysteminKorea.Thisindicatesthatthedivisionoflaborwithinglobalvaluechainsdemonstratedstrongresilienceagainsttemporaryshocks.Meanwhile,therecentslowdowninexportstoChinaseemstobeattributedtosluggishdomesticproductioninChinaduetoU.S.sanctionsandthestrategicrelocationofproductionbasesfromChinatooverseas.11Consequently,export-linkedproductionappearstobeweakeningaswell.

7.Industryconcentrationforexport-linkedproductionislowerthanforexports,suggestingthatitsnetworkofproductionrelatedtoChinaspansabroaderrangeofindustriescomparedtoexports.Forexample,in2020,theITindustryaccountedfor42%ofKorea’stotalexports.However,itscontributiontoexport-linkedproductionwasonly26%.Inaddition,ifexport-linkedproductionisdividedintoexportsofintermediategoodstoChina,exportsviathirdcountries,andexportsafterre-processinginKorea,thesizeofdomesticre-input(■)isfoundtobesimilartothesizeofdirectexportsofintermediategoods(■),asshowninFigure7.Thisindicatesthatasignificantportionofproductionactivitieswithinindustries,whichappearstobeaimedatdomesticconsumption,isactuallyindirectexportslinkedtoproductioninChina.Byindustry,inadditiontotheelectronicandchemicalindustries,ofwhichexportsaccountforalargerproportion,export-relatedproductionactivities’shareofthewholesaleandretailindustryis8%,whichisnotasmallportion,asshowninFigure8.

6TheOECD,initsInter-CountryInput-Output(ICIO)tables,publishesanindexfortheproportionof“export-linkedproduction”ofgrossproduction,referredtoas“foreignproductionexposure:exportside(FPEX).”Sinceglobalsupplychaindisruptionscausedbypandemic-relatedborderclosures,wars,andnaturaldisastersinrecentyearscoulddamagethevalueaddedembeddedintradeortheaccumulatedvalueoftradegoods,itisnecessarytoestimatetradeintermsofgrossproduction.Fromthisperspective,relatedresearch(Baldwinetal.2022,2023)adoptedthe“look-through”approach,deeplyexaminingtheproductionstructurerelatedtoexports(OECD2024).

7Directexports=customclearanceexports(goodsexports)+serviceexports

Export-linkedproduction=productionofintermediategoodsforexport(includingintermediategoodsrelatedtodomesticnthtransactionsorexportstoChinaviaathirdcountry)

Whileexportsofintermediategoodsareincludedinbothdirectexportsandexport-linkedproduction,finalgoodsnotrelatedtoproductionactivitiesoftheimportingcountryareexcludedfromexport-linkedproductionwhenmeasuring“production”linkagebetweentradingpartners.Giventhis,thetwoindicatorsneedtobeusedcomplementarily.Fordetails,referto“Box1.HowtoCalculateDirectExportsandExport-LinkedProduction.”

8Giventhatglobalexport-linkedproductionaccountsfor20.1%ofKorea’sgrossoutput(asof2020),export-linkedproductiontoChinarepresents7.1%ofKorea’sgrossoutput.Thatshareincreasesto11.8%whenconsideringonlythemanufacturingindustry.

9UsingtheOECD-ICIOtablesfor1995to2020,tradestatisticsbycountryanditeminUNComtrade,andmethodsofAntras&Chor(2018),weextendedtheICIOtablesto2022.Fordetails,referto“Box2.ExtensionoftheOECDICIOTables.”

10AsforKorea’sinvestmentinandexportstoASEANstates,referto“CharacteristicsofKorea’sExporttoASEAN-5CountriesandProspect”(BankofKorea,February2024,KoreaEconomicOutlook).

11UnlikethecaseswhereKoreancompaniesnewlyestablishedorexpandedproductionbasesforintermediategoodsinASEANcountries,thefinalprocessesinChinaarerecentlybeingrelocatedtoASEANcountries.ThisshiftisweakeningtheproductionlinkagebetweenKoreaandChina.

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ProductionlinkagebetweenKoreaandChinafarexceedsthescalecapturedbyexportsonacustom-clearancebasis

Figure6.China’sshareof

exports1)

Notes:1)Basedonallindustries.

2)Exports=goodsandserviceexports.

Export-linkedproduction=productionofintermediategoodsforexport.

3)2021-2022arebasedontheextendedICIO.

AsignificantportionofintermediategoodsexportsrelatedtoproductioninChinaisdrivenbydomesticdemand

Figure7.Decompositionof

export-linkedproductionto

China

Note:1)2021-2022arebasedontheextendedICIO.

Sources:OECDICIO,Research

Department.

WholesaleandretailtradeindustrieswhichaccountforasignificantportionofoutputarerelatedtoChina

Figure8.Shareofexport-linked

productiontoChinaby

industry1)

Notes:1)Basedon2020.

2)Figuresin<>indicatetheshareofeachindustry.

Sources:OECDICIO,Research

Department.

Sources:KoreaCustomsService,OECDICIO,ResearchDepartment.

Ⅲ.FactorsofChangeinExport-LinkedProductiontoChina

8.ChangesinexportstoChinaandexport-linkedproductionappeartobeinfluencedbyshort-termdemandfactorsandlong-termshiftsintheglobalproductionstructure.Specifically,thesefactorsincludecyclicaldemandfactorssuchas:①theglobaleconomyandITindustrycycle,②sluggishdomesticdemandinChina,andproduction-relatedstructuralfactorssuchas③improvedcompetitivenessofChina’sintermediategoods,④relocationofproductionbasesbyfirms,and⑤U.S.-Chinatradeconflict.

Ⅲ-1.DecompositionofFactorsofChangeinExport-LinkedProduction

9.Toexaminetheimpactofeachfactor,variationsinexport-linkedproductiontoChinaare

decomposedintochangesinfinaldemandandchangesinproductionstructure(inducementcoefficient).IntheICIOtables,changesinexport-linkedproductioncomprisechangesinfinaldemandandtheinducementcoefficientassociatedwithfinaldemand.Inthischapter,weexaminetheindependentchangeofeachfactor.Specifically,changesinexport-linkedproductionaredecomposedinto:①changesinfinaldemandwiththeinducementcoefficientremainingunchanged(referredtoas“finaldemandcontribution”),and②changesintheinducementcoefficientwithfinaldemandremainingunchanged(referredtoas“productionstructurecontribution”).FinaldemandcontributionreferstochangesintheglobaldemandforChina-producedfinalgoods,irrespectiveofchangesintheintermediategoodsinput

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structure.Ontheotherhand,productionstructurecontributionisattributedtochangesintheinputstructureofexport-linkedproductiontoChina,regardlessofchangesindemand.Additionally,finaldemandcontributionisfurtherdivided,basedonthedemand-sourcecountry,intoChina’sfinaldemandcontributionandglobal(outsideChina)finaldemandcontribution.

10.Finaldemandcontributionisexpectedtoreflect①theglobaleconomyandITbusinessand

②cyclicalfluctuationsinChina.Meanwhile,productionstructurecontributionislikelytoincorporate

③thestrengtheningofChina’scompetitivenessand④relocationofproductionbases.12

11.Finaldemandcontributionincreaseduntilthe2010sandthendeclinedgradually,fluctuatingwiththeeconomiccycle.Ontheotherhand,productionstructurecontributionhasbeenonadownwardtrendsincethemid-2000s(Figure9).Thissuggeststhat,althoughthegrowthofexport-linkedproductiontoChinaappearstomoderatefromthe2010s,structuraldownsidefactorshadalreadybeguntoemergeafewyearsearlier.Althoughfinaldemandcontributionhasdwindledrecently,itcontinuestogrowonanominal-valuebasis.Since2010,onanannual-averagebasis,thegrowthofexport-linkedproductiontoChinaduetochangesinfinaldemandfromChinaandfromtherestoftheworldhasaccountedforapproximately1.3%and0.3%,respectively,ofKorea’sGDP.Incontrast,thedecreaseinexport-linkedproductiontoChinaduetochangesintheproductionstructuresince2006hasaccountedforabout0.7%(annualaverage)ofKorea’sGDP.

Finaldemandcontributionbegantodeclinefromthe2010s,whileproductionstructurecontributionstartedtofallfromthemid-2000s

Figure9.Decompositionofchangeinexport-linkedproductiontoChina1)byfactor

Note:1)Theyear-on-yearchangeinexport-linkedproductiontoChinaisconvertedintototalvalueadded

(GDP)inthepreviousyear.

Sources:OECDICIO,ResearchDepartment.

Ⅲ-2.ChangeinFinalDemand:CyclicalFactors

12.Fluctuationsinexport-linkedproductionareconsistentlyinfluencedbytheglobaleconomyand

12⑤TheU.S.-Chinaconflictisexaminedseparatelybecauseitimpactsbothdemandandstructuralfactors.

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ITbusinesscycle.TheimpactoftheglobaleconomyonKorea’sexportstoChinaandexport-linkedproductionismediatedthroughproductionactivitiesinChina.13Figure9showsthatthecontributionofglobalfinaldemandfellsharplyduringtheglobalfinancialcrisis,graduallydeclinedthroughoutthe2010s,andthenreboundedin2017and2018,inlinewiththeglobaleconomy.Sincethepandemic,sharpfluctuationsintheITbusinessappeartohavedrivenchangesinfinaldemand.ExportstoChinaandexport-linkedproductionincreasedinlinewithITbusinesstrendsimmediatelyfollowingthepandemicbutdecreasedfrom2022.Theyareexpectedtobeonanupwardtrendagain,thankstoareboundintheITsectorsincelatelastyear.

13.ThemoderatinggrowthofexportstoChinaandexport-linkedproductionsincethe2010sisbelievedtobesignificantlyinfluencedbythesluggishdomesticdemandinChina.China’sgrowthhasbeenonadownwardtrendsincethe2010s.Consequently,Korea’sexportsoffinalgoodstoChinahaveslowed,14andtheoveralldecelerationofChina’sproductiongrowthhasalsoimpactedtheexport-linkedproductionofintermediategoods.Reflectingthesetrends,thecontributionofChina’sfinaldemandtoexport-linkedproductiontoChinahasgraduallyslowedsince2010.Meanwhile,sincethepandemic,theglobaleconomicdownturn,sluggishrealestatesector,andcumulativeincreaseingovernmentdebthavedeepenedtheslumpinChina’sdomesticdemand.ThesefactorsarelikelytohaveexacerbatedthedownsideriskstoKorea’sexportstoChinaandexport-linkedproduction.

TheglobaleconomyinfluencesKorea’sexportsandexport-linkedproductiontoChinathroughChina’sexports

Figure10.Contributionofglobalfinaldemandtoexport- linkedproductiontoChina1)

Note:1)YoY,basedonnominalvalue.

Sources:IMF,OECDICIO,ResearchDepartment.

Figure11.ExportstoChina

andtheglobaleconomy

Note:1)Separatedacyclical

componentfromalong-termtrend,usingHP

filtering.

Sources:OECD,WorldBank,KoreaCustomsService.

ExportstoChinaarealsocloselyrelatedtodomesticdemandinChina

Figure12.ExportstoChina

anddomesticdemandinChina

Note:1)Separatedacyclical

componentfromalong-termtrend,usingHP

filtering.

Sources:OECD,KoreaCustoms

Service.

Ⅲ-3.ChangeinProductionStructure:StructuralFactors

14.Changesinproductionstructurehaveresultedinaconsistentdeclineinexport-linkedproduction

13Since2000,thecorrelationcoefficient(forthesameperiod)betweenglobalcyclicalchangesandChina’sexportvolatilityhasbeen0.73.Meanwhile,thecorrelationcoefficientbetweenchangesinChina’sgrossexportsandchangesinKorea’sexportstoChinastoodat0.84,indicatingaveryhighlevelofco-movement.

14TherelationshipbetweenKorea’sexportstoChinaanddomesticdemandinChinahasaveryhighlevelofcorrelation(0.49),thoughitislowerthanthecorrelationbetweenKorea’sexportstoChinaandChina’sexports.

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sincethemid-2000s,exceptforaslightreboundrightaftertheglobalfinancialcrisis(Figure9).Asthegrowthoffinaldemand’scontributiontoexport-linkedproductionhasgraduallydeclinedandtheproductionstructure’scontributionhascontinuedtofall,thelatterisbecomingmoreimportant.Therelativecontributionrateoftheproductionstructure(fiveyears,centeredmovingaverage)turnednegativein2006,droppingto-50%by2020.ThischangeinproductionstructurehasweakenedtheproductionlinkagebetweenKoreaandChina.Ifwedividetheexport-linkedproductiontoChinainto“facevalueexposure”and“hiddenexposure”(supplychain-linkedproductionthrough2ndandhigherlinkages),theshareofhiddenexposurehasdecreasedslightlysincethemid-2010s.15

15.Thischangeinproductionstructurehashadawidespreadimpactontheexport-linkedproductiontoChinaofKorea’smainindustries.Thetextileandclothingindustry,whichaccountedforasignificantportionofKorea’sexport-linkedproductiontoChinainthe1990s,showedaprominentdeclinefromthesecondhalfofthe1990s.Inthemid-2000s,thechemical,steel,andprimarymetalindustriesexperienceddeclines,andinthe2010s,thepetrochemicalindustrybeganadownwardtrend(Figure13).Thedownwardtrendsintheseindustrieshavecontinueduntilrecently.

16.TheITsectorjoinedthestructuralslowdownfromthelate2010s.UnlikeJapan’sITsector,whichshowedarapidstructuraldeclinefromthemid-2000s,KoreahasrespondedeffectivelytothegrowthoftechnologyinChinaandmaintainedatechnologygap.Consequently,thestructuraldeclineinexport-linkedproductiontoChinaintheITsectorhasemergedrelativelyslowly.However,therecentslowingtrendisaccelerating,becomingassteepasitwasinJapaninthepast.LookingatthestructuralchangesintheITsector’sexport-linkedproductiontoChinaoverthemostrecentthree-yearperiod(2018to2020)bycountry,Koreahasexperiencedthefastestdeclineamongmajorcountries.Ontheotherhand,duringthesameperiod,Vietnamhasshownremarkablegrowthinthisarea,duetotheimpactoftherelocationofproductionbasesfromChina.

Recently,theITsector’sexport-linkedproductiontoChinahasslowedrapidly

Figure13.Cumulativechangeinexport-

linkedproductiontoChinabyindustry

(productionstructurecontribution)1)

Note:1)Cumulativeannualchangeintheratioofexport-linkedproductiontoChinatogrossoutputbyindustry,withthehighestlevelstandardizedtozero.

Sources:OECDICIO,ResearchDepartment.

Korea’sexport-linkedproductiontoChinahasdecreasedthemost,whileVietnam’shasincreasedthemost

Figure14.ChangeinITsector’sexport-

linkedproductiontoChinabycountry1)

(productionstructurecontribution)

Note:1)TopeightcountriesinITsector’sexport-linked

productiontoChinain2020.

Sources:OECDICIO,ResearchDepartment.

15Theshareofhiddenexposureintotalexport-linkedproductiontoChinasteadilyrosefrom77.3%in2004to82.3%in2015andthendeclinedto81.6%by2020.FacevalueexposurereferstoKoreanintermediategoodsthataredirectinputsforproductioninChina.Hiddenexposure,ontheotherhand,involvesproductioninKoreathatindirectlycontributestoproducingallintermediategoodsusedforproductioninChina.AccordingtotheOECDICIOtables,facevalueexposureandhiddenexposurecorrespondtothedecompositionoftheLeontiefinversematrix(I+A+A2+A3···)intoprimaryintermediategoods(I+A)andremaininginfiniteproduct(A2+A3···),respectively.

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17.Thestructuralslowdownofproduction-linkedexportstoChinaisdrivenbyChina’sincreasedself-sufficiencyinintermediategoodsbyenhancedcompetitiveness,andgrowingdemandforlocalfinalgoods.China’sself-sufficiencyinintermediategoodsdeclinedrapidlyuntilthemid-2000sasitreliedonoverseasprocurementofintermediategoodsduetoits“opening-up”policy.However,itrosewiththeacquisitionoftechnologyfromtradeandpoliciesaime