8th CJK Cooperation Dialogue

Session 1

Challenges of CJK Economic Cooperationin the Era of Post Pandemic
Jan. 17 2022

CHO Choongjae, Deputy President대외경제정책연구원

Korea Institute for International Economic Policy(KIEP)

Korea :• The impact of the pandemic is insignificant• Over the past 20 years, China's share has been declining since 2015 peak, 28.5%• Share of Japan has steadily declined to 6.8% in 2021

Trade• ASEAN countries’ share continues to increase to 14% in 2021(%)

(Mil. US$)

ChinaJapan
ASEAN

Note : 2021 year is from Jan. to Nov..
Source : KITA net

KIEP Korea Institute for International Economic Policy

1Korea :• The impact of the pandemic is greater in 2021 than in 2020
• China's share dropped sharply after the peak of 39% in 2003~2005 and stagnated

FDI• Share of Japan remains at around 2% without major change• ASEAN countries’ share increasing gradually to 12% in 2021(%)

(Mil. US$)China

ASEANJapan

Note : 2021 year is from Jan. to Sept..
Source : KEXIM Bank DB

KIEP Korea Institute for International Economic Policy

2China : T• Despite the pandemic, the largest trade volume expected in 2021• Trade volume between Korea, Japan and ASEAN increased in 2021 compared to 2019
• Korea’s share has decreased very slightlyTrade• The share of Japan has continued to decrease to almost one-third• ASEAN countries’ share has steadily risen(%)(Mil. US$)

Japan

ASEAN

Korea

Note : 2021 year is from Jan. to Nov..
Source : National Bureau of Statistics of China

KIEP Korea Institute for International Economic Policy

3China : T• FDI to the world continues to increase, especially since 2016
• FDI to Korean and Japan plunged in 2020 due to pandemic• Korea's share has remained stagnant after 0.1% decline in 2006

FDI

• Share of Japan remained at 0.3% during the same period• ASEAN countries’ share increased rapidly to 10.5% in 2020.

(Mil. US$)

(%)

ASEAN

Korea

Japan

Source : Ministry of Commerce, People's Republic of China
KIEP Korea Institute for International Economic Policy

4Japan : TTrade•

The volume of trade with the world has been on a downward trend since 2012•

The impact of the pandemic is insignificant due to increase sharply in 2021•

China’s share has continued to increase until recently, reaching 24% in 2020•

Share of Korea and ASEAN remained unchanged at 5-6% and 14-15%, respectively(%)(Mil. US$)

ChinaASEAN

Korea

Source : World Bank, WITSKIEP Korea Institute for International Economic Policy

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FDI•

FDI to the world continues to increase, it surged in 2019 to more than $250 billion•

Impact of the pandemic on China and Korea estimated significant•

China's share has decreased since the peak of 19% in 2004, reaching 5.7% in 2021•

Share of Korea gradually decreased to 0.6% in 2021

•ASEAN countries’ share is being volatile, but it increased to more than 18% in 2021(%)(Mil. US$)ASEAN

ChinaKorea

Note : 2021 year is from Jan. to Sept.
Source : JETROKIEP Korea Institute for International Economic Policy

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CJK Economic Cooperation

Features In all three countries, the effect of the pandemic on trade was insignificant
 In particular, the impact between the three countries was relatively small On the other hand, the effect of the pandemic on investment(FDI)
between the three countries is significant
 Despite the fact that the three countries' Covid-19 quarantine situation isbetter than that of ASEAN, investment between the three countries declined
sharply, while China and Japan's investment in ASEAN, where the quarantine
situation is relatively poor, increased significantly
KIEP Korea Institute for International Economic Policy

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CJK Economic Cooperation

Challenges

To organize and operate a consultative body related tomeasures to stimulate investment between the three countries.
 Over the past 20 years, the proportion of investment between thethree countries has been declining faster and more significantly
than that of trade•overseas investment increased in the mid- to long-term•

their economies were the 1st, 2nd, and 4th in Asia•

the closest to each other•investment environment is better than other countries•

US has strengthened its domestic supply chain policy

The investment amount of the four Korean companies
announced before and after the 2021 Korea-US summit in
the US alone is about 40 billion dollars.

KIEP Korea Institute for International Economic Policy

8

CJK Economic Cooperation

Suggestions

1. Sharing and strengthening awareness of theprinciple of separation of politics and economy
 Removal of China’s unnecessary regulations has taken
after the THAAD crisis Removal of Japan's export restrictions related to pasthistory and compensation issues

2. Continuously improving the investment
environment, especially regulations
 China's recent removal of regulations for exceeding 50% of
foreign ownership and the abolition of the maximum of
two joint ventures per foreign company in the passenger
car sector are good examples

KIEP Korea Institute for International Economic Policy

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CJK Economic Cooperation

Suggestions

3. Strengthening trilateral cooperation and investment
in quarantine and vaccines, carbon neutrality andclimate change Not a field of conflict between the US and China
 Due to their nature, neither country can properly respond toquarantine or climate change without cooperation between
the three neighboring countries
 In particular, the need for cooperation is high as the threecountries have a difficult to secure sufficient clinical patientsfor the development of vaccines or treatments
 As a mid- to long-term cooperative task, it is necessary toestablish and operate a concrete and practical cooperative
body stably

KIEP Korea Institute for International Economic Policy

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CJK Economic Cooperation

Suggestions

4. Strengthening cooperation and related investment insupply chain stability for general-purpose products
 The three countries have many favorable conditions forstabilizing their supply chains through near shoring Discuss and cooperate with each other on items with potential
supply chain difficulties, and induce mutual investment

5. Strengthening cooperation for joint investment into
ASEAN countries.
 The three countries’ increase in trade and investment in ASEAN
is an inevitable This means that the possibility of competition as well as
cooperation between the three countries still exists in the
ASEAN market

KIEP Korea Institute for International Economic Policy

11Thank You

KIEP Korea Institute for International Economic Policy