Cheap Chinese goods seen as double-edged sword for Korea
Cheap Chinese goods are flooding into Korea amid the growing presence of Chinese e-commerce platforms, creating both favorable and unfavorable conditions for the Korean economy as it tries to lessen reliance on China, according to scholars and consumer groups, Friday.
China has been dumping goods on global markets to make its way out of weakened domestic consumer demand in the middle of an economic slump.
Under the circumstances, Korea has emerged as the center of transshipment of goods from China to third countries, mostly those in North America and Europe.
According to Incheon International Airport Corp., Friday, a total of 98,560 tons of foreign-made goods were transported by air through the airport in 2023, up 43.1 percent from 2022.
Of the goods, 99.6 percent were originally shipped from China.
North America accounted for 47 percent of the final destinations, and Europe made up another 31 percent.
“Such logistical importance of Korea is a plus factor, especially considering that China’s economic slowdown is likely to last for the next couple of years and that Chinese manufacturers are likely to export more cheap goods,” Lee Hun-soo, an air freight logistics expert and professor at Korea Aerospace University, said.
He referred to the International Monetary Fund’s February report, which forecast the growth rate of the Chinese economy to decline further to 3.5 percent by 2028 from 5.2 percent in 2023.
“Although not intended, China’s export of low-priced items is certainly boosting Korea’s logistics industry,” the professor added.
Apart from transshipments, Chinese online shopping platforms, like AliExpress and Temu, have been making rapid inroads into Korea with a wide range of items that are offered cheaper than Korea-made goods. This includes a wide range of items, some popular ones being apparel, kitchenware, toys, electronic devices, sports equipment and construction tools.
The number of AliExpress users in Korea surged to 8.18 million in February from 3.5 million a year earlier.
Regarding Temu, it only advanced to Korea in July 2023, about five years after AliExpress. Nevertheless, Temu managed to attract more than 5 million customers in its first year of doing business in Korea.
Consequently, China surpassed the United States to become the top direct purchase choice for Korean online shoppers.
Out of the total 6.75 trillion won ($5.01 billion) spent by Korean shoppers on overseas direct purchases, China accounted for 3.28 trillion won, or about 48 percent, in 2023.
The Korea National Council of Consumer Organizations, a Seoulbased advocacy group for consumers, assessed China’s “export of deflation” as having a positive aspect for budget-conscious Korean households in the era of high inflation.
While many Koreans favor these Chinese online shopping platforms amid a high cost of living, some experts warned that the shopping trend may deal a blow to Korean manufacturers, as many of them are small and medium-sized enterprises (SMEs) and lag behind Chinese rivals in terms of cost competitiveness.
“SMEs may shut down operations and go bankrupt in the worst case, as the door is now open wider for more cheap Chinese goods to come into Korea,” said Jeong Eun-ae, a researcher at the Korea Small Business.