Reality Check: South Korea and China Face More Complex Economic Dynamics

On May 27, Chinese Premier Li Qiang vowed a “new start” in a trilateral summit with South Korean and Japanese leaders, where they reached a general consensus on future cooperation in various areas. While this “refresh” could be a positive sign for South Korea and China to improve their economic ties, evolving bilateral dynamics, intensifying geopolitical tension, an uncertain Chinese economy, and a more competitive relationship in the global value chain pose serious challenges for two countries’ economic relations.

Evolving Economic Ties 

China has been South Korea’s most vital trade partner for the past decade. This remains true despite the THAAD controversy in 2017, when Seoul agreed to deploy the U.S. missile defense system, and Beijing responded with economic coercion. The episode undermined China-South Korea ties, and several sectors including automotive, retail, tourism, and entertainment suffered, yet the two economies remain highly integrated.

Recently, however, South Korea’s economic ties with China have waned. Since the pandemic, this relationship has notably retracted. China’s share of South Korea’s total exports has fallen from 25.9 percent in 2020 to 19.7 percent in 2023, according to the Korea Customs Service, while exports to the U.S. increased from 14.5 percent to 18.3 percent during the same period.

At one point in 2023, South Korea’s export share to the U.S. surpassed the one to China, the first time in two decades (see Figure 1 below). In 2024, South Korea’s export share to the United States (19.3 percent) even surpassed China (18.8 percent) for the whole quarter.