The increasing requirement for lithium, which is essential for electric vehicle batteries, has resulted in China having a controlling role in the lithium market, causing imports to become more expensive. As the Chinese economy has slowed down, South Korea’s semiconductor exports have been detrimentally affected and this produced a $5.074 billion and 6.5 trillion won trade deficit with China by February 2020. This deficit surpasses those of Australia who import natural gas and Saudi Arabia who are the largest importers of oil. It is estimated that this year will be the first time in 31 years that South Korea’s trading with China will be negative.
China’s reliance on imports of intermediate goods has decreased as it becomes increasingly self-sufficient, resulting in South Korea’s export structure becoming similar to China’s. This shift is largely due to the Chinese government’s policies aimed at boosting domestic demand and product competitiveness. China now accounts for less than 20% of South Korea’s exports compared to 27% five years ago. These changes in the global market present both difficulties and potential benefits for South Korea, offering an opportunity to explore other markets and diversify its exports.