Asia Pacific round-up: South Korea-Japan reconcile, China facing difficulties and Vietnam potential

Thu 29 Jun 2023
Posted by: Phillip Adnett
Trade News

Asia pacific region in digital map

In the latest of the IOE&IT Daily Update’s round-ups of Asia-Pacific trade news, we cover two Asian powers rebuilding diplomatic and trading ties, the faltering Chinese economy and the potential rise of a new trading hotspot.

Japan and SK bury hatchet

Two major Asian economic powers have reconciled after a four-year long economic row.

According to AP, Japan has said that it will reinstate South Korea as a ‘preferred trade nation’ from 21 July. Japanese trade minister Yasutoshi Nishimura also said that both countries had agreed to a framework to review and follow up on systems in the future.

Lee Do Woon, a spokesperson for South Korean president Yoon Suk Yeol, said that “for the first time in four years, all export restrictions between the countries have been lifted”.

In July 2019, Japan removed South Korea from its ‘white list’ of countries of countries given fast-track approvals for trade, in response to criticism of Imperial Japan’s forced labour practices during the second world war.

Relations have improved steadily over the last few years, with a summit held between Yoon and Japan’s prime minister Fumio Kishida in April – the first such meeting for 12 years.

SK exports recover

South Korean exports appear to be recovering after a difficult seven months.

Bloomberg reports that preliminary trade stats show a 5.3% gain in exports in the first 20 days of June when compared to the same period last year. This could represent the first monthly gain since August.

Several analysts said this could also indicate that the continuous fall in exports had “bottomed out”, although this was accompanied by warnings of reading too much into data set. Part of the change was attributed to shifting global trade patterns.

For the first time in almost twenty years, South Korea also shipped more goods to the USthan to China.

The FT reported that US demand for Korean cars and semiconductors, combined with falling Chinese appetite for Korea’s semiconductors, was partly responsible for the change in trade flows.

One study from the Korea International Trade Association showed that Korea-to-China trade had decreased since 2021 across a number of sectors, including petro-chemicals, car parts and displays.

China’s economy turns

China’s economy, long an Asian success story, is facing a difficult period despite the government’s insistence that it will hit its growth targets.

Although Chinese premier Li Qiang said that his country was still on track to hit the annual 5% growth target, as reported by CNBC, wider economic data is indicating a gloomy period for the economy.

Reuters reports that annual profits at various industrial firms continue to fall, adding to data published in May showing a fall in jobs, exports and sales.

Youth unemployment hit 20.8% last month and China’s benchmark CSI stock index has fallen by 1% so far this year. By comparison, the US equivalent S&P 500 rose by 13% over the same period.

Recently, Li spoke at the World Economic Forum’s Annual Meeting of the New Champions in Tianjin and warned of the dangers of “de-risking” supply chains away from China, saying that these approaches would lead to economic fragmentation.

India cosies up to US, Egypt

Half a dozen trade disputes between the US and India have been resolved as part of a “new beginning” for joint relations between the two countries, according to Indian PM Narendra Modi.

The announcements came at a White House press conference last week featuring Modi and US president Joe Biden. According to Politico, one of the disputes related to former president Donald Trump’s tariffs imposed on steel and aluminium, with retaliatory Indian tariffs on a number of US products also being removed.

The Hindu BusinessLine noted that this development was part of US strategy to pivot away from China, with the Indian technology sector a major potential beneficiary.

After his trip to the US, Modi visited Egypt where he signed a joint statement with Egyptian president Abdel Fattah el-Sisi, committing both countries to strengthen ties on a number of issues, including trade and investment.

Vietnam’s ascent

According to Standard Chartered’s latest report on the future of trade, Vietnam could be the next major global trade hotspot.

The research, entitled ‘Future of Trade: New opportunities in high-growth corridor’, predicts that Vietnamese export revenue could reach $618bn by 2030, with an annual growth of 7%.

Michele Wee, CEO of Standard Chartered Vietnam, said that Vietnam held “tremendous potential to be a global trading hub.”

The major markets expected to be the recipients of these increased trading flows included the traditional Asian economic powers of India and China, but also included the US.

Recently, Vietnam’s government has focused on improving trade links with China, with the country’s PM Pham Minh Chinh calling for Chinese investors to expand their investments in the country.