China encroached on emerging countries and Europe as the U.S. was blocked... “Korea’s major industries are on the brink”

Korea Institute for Industrial Economics & Trade ‘International trade structure change trends and Korean industry’s response direction’

China's battery market share in emerging countries is 80-86%... Europe has a virtual monopoly at 90%

(Seoul = Yonhap News) Reporter Shin Chang-yong = Chinese manufacturing, blocked by U.S. tariff barriers, has been found to be rapidly encroaching on emerging markets and European markets with unprecedented unit prices and overwhelming volume.

The Korea Institute for Industrial Economics and Trade, a national research institute, described this phenomenon as the 'China Redwave' and diagnosed that Korea's major industries are being driven to a cliff with nowhere to retreat.

According to the report ‘Trends in changes in international trade structure and Korean industry’s response direction’ published by the research institute on the 8th, China’s share of the US product import deficit has plummeted from 45% in 2016 to 15% recently.

The problem is that Chinese products that have been pushed out of the U.S. market are concentrated in emerging countries and Europe, and competition with Korea is becoming more intense.

In particular, China is rapidly increasing its market share by increasing export volume and lowering prices throughout non-Western countries such as ASEAN, the Middle East, Latin America, and Africa.

The import share of Chinese batteries in eight emerging countries accounted for an overwhelming majority, including Saudi Arabia and Vietnam (over 80%), India (86%), and the Philippines (71%). In home appliances, Chinese products accounted for 77% in Malaysia, 76% in Thailand, and 75% each in Indonesia and Brazil.

China's offensive is also strong in automobiles and machinery.

In the automobile import market, the share of Chinese products was 42% in Indonesia, 41% in Thailand and Malaysia each. The proportion of machinery made in China also increased to 60% in Indonesia, 52% in Thailand, and 45% in Vietnam.

It was found that Korea managed to maintain its market share in only a few markets, such as shipbuilding, where security barriers are in place, Mexico, which is subject to origin regulations under the United States-Mexico-Canada Agreement (USMCA), and India, which is pursuing a Chinese-style import substitution policy.

The rate of encroachment into the European market is also rapid. Over the past 10 years, the European Union's imports from China have more than doubled from $356.4 billion to $724.8 billion. Chinese products virtually dominate the market for batteries (90%) and solar energy (98%), and exports are rapidly increasing by switching to hybrid vehicles after the imposition of countervailing duties on electric vehicles (BEVs).

In the European market, Korea is doing well in shipbuilding, weapons systems, cosmetics, and biosimilars, but tensions are rising recently with the rapid rise of Chinese companies in the raw materials and pharmaceutical markets.

The report suggested that in order to respond to the expansion of China's manufacturing industry, it is necessary to maintain cutting-edge semiconductor manufacturing capabilities while increasing cost competitiveness across the industry and making bold local investments in emerging countries.

Lee Jun, head of the Strategic Industry Research Center at the Korea Institute for Industrial Economics and Trade, said, "China is now the number one threat to protecting the future market and competitive edge of key industries. The K-shaped industry polarization phenomenon, which is obscured by the special semiconductor industry, is not primarily caused by our internal problems, but rather the external variable of the advancement of China's manufacturing industry that has continued over the past 20 years is decisive."