China South Korea Photo:VCG

 
South Korea's trade deficit may continue as commodity prices remain high in the wake of the Russia-Ukraine conflict, harming the South Korean economy which relies heavily on imports of raw materials.

South Korea logged a trade deficit for the third consecutive month in June, with faster growth in imports than exports, government data showed Friday.

Per data from the Ministry of Trade, Industry and Energy, the trade deficit amounted to $2.47 billion in June. It has been in the red for three months since April and has shifted from a surplus of $4.37 billion in the same month a year earlier.

It marked the first time in 14 years that the country registered a trade deficit for three months in a row and the country's trade gap for the first half of the year, at $10.3 billion, is also the biggest on record.

The data is alarming as South Korea, the world's No.8 trading nation, had managed to keep a whole-year trade surplus for 13 years up to 2021. It also came as a senior South Korean official talked of "decoupling with China" talk during his visit to Europe, sparking a wave of criticism. 

Earlier this week, Choi Sang-mok, senior presidential secretary for economic affairs, said at the NATO summit that South Korea should reduce its reliance on China for exports, which some analysts read as a sign that the administration is veering away from China in terms of the economy.

Experts said the advisor's remarks reflected a desire among some in South Korea to be less dependent on China in terms of supply chains. But it remains to be seen if such efforts will work. The international division of labor and global supply chains have been formed by economic principles over decades, not politics, they noted.

South Korea's overall exports remained strong, with major categories such as semiconductors, steel, batteries and bio-products all doing well. However, an 87.5 percent increase in energy imports wiped out the trade surplus. 

In June, exports to China declined 0.8 percent year-on-year, while exports to the US jumped 12.2 percent.

Zhang Huizhi, vice dean of the Northeast Asian Studies College at Jilin University, told the Global Times on Thursday that South Korea's narrowing trade surplus with China was due to China's improved economic strength, which means a growing number of mid-range products no longer needed to be sourced from South Korea.

According to data from China's General Administration of Customs, China's trade deficit with South Korea narrowed by 21 percent in the first five months this year in yuan terms.

According to South Korean customs data, South Korea saw the first single month trade deficit with China, its largest trading partner, in May. A sharp 40.9-percent-incresase in Chinese-made semiconductors was believed to be behind the reverse. 

Amid the US tech crackdown, the Chinese mainland's semiconductor industry has made progress and for the first time the country's three top chipmakers - SMIC, HuaHong and Nexchip - accounted for more than 10 percent of global foundry revenue in the first quarter of 2022, according to media reports. 

Experts said that to cope with the complex global situation in the post-virus world, cooperation should be deepened rather than weakened for big trading nations such as China and South Korea.