The Impact of China’s Reopening on South Korean Economy [BOK Issue Note 2023-6]

BOK Issue Note
China Reopening South Korean Economy Exports Tourists
Research Department(02-750-4242)

  The Chinese economy is gradually coming back amid easing in Covid-19 infections following the exit from the zero-virus policy in December 2022. Consumption is expected to pick up led by offline services in line with the normalization of economic activities. But uncertainties about the effect of reopening in China remain high due to sluggishness in China’s property market and global economic slowdown. This research studies China’s post-reopening developments and their impacts on the South Korean economy.

  China’s reopening is expected to play positively for the Korean economy through recovery in exports and return of Chinese tourists. Outbound shipments will first be led by items sensitive to domestic demand in China such as chemical products, followed by IT products like smartphones and semiconductors. The return of Chinese tourists will boost Korean services including transportation and tourism industry.

  However, the Chinese contribution to the Korean economy can fall short of past levels as China’s recovery will likely be led by rebound in consumer spending, while external demand remains constrained by inventory buildup. The rise in commodity prices coupled with inflationary pressure in China from its economic recovery and the return of Chinese tourists can add to inflationary buildup in Korea.

  In order for the Korean economy to fully utilize China’s reopening, it is necessary to steadily strengthen the export competitiveness of intermediate goods industries such as IT products. In addition, it is also important to increase the competitiveness of the service industry such as travel and cultural contents.

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