In a situation where China is out to retaliate against Korean businesses including Lotte Mart for the Korean government's decision to deploy the Terminal High Altitude Area Defense (THAAD) system and now bans its people from traveling to Korea in groups beginning on March 15, it is ironically increasing its imports of components and intermediate goods from Korea such as semiconductors and displays.
Given China is dependent heavily on processing trade, it would be difficult for the country to sever ties with Korean industry entirely. China imported semiconductors worth US$4.34 billion in February this year, up 75.9 percent from the same month in the previous year. Korea's semiconductor exports to China fell abruptly in July last year after the Korean government announced it would allow the U.S. Forces to bring in THAAD system in its soil. After falling 4.9 percent in July year on year, Korea's semiconductor exports dropped 23.1 percent in August.
But the declining trend didn't last long. In September, just two months after the THAAD announcement, Korea's exports to China climbed up 7.1 percent, followed in December by 22.3 percent to $5.86 billion. Of all the exports to China, semiconductors and other intermediate goods account for 78.4 percent.
Yoo Byung-gyu, president of the Korea Institute for Industrial Economics & Trade, said, "The items for which the Chinese government impose sanctions are mostly not directly related to its own industries including consumer goods, tourism, and cultural contents. If it does something against any of the manufacturing industries, it is fully aware that there will be backlashes. As the two economies are now inseparable, we need wisdom to think economics apart from politics."