SKorea uneasy with China's growing economy

(Agencies)
Updated: 2009-04-14 15:48

SEOUL -- South Korea expressed concern yesterday about China's rise as a global economic power, saying its own economic growth could be harmed.

The Ministry of Strategy and Finance said in an eight-page "reference material" that China's growing clout was likely to intensify competition between the two countries especially in export markets and energy diplomacy.

That contrasted with the past practice of describing China's economic growth as an opportunity for South Korea to keep producing export goods for other markets using cheap labour, as well as a threat to its own exports.

"Competition with China is expected to intensify in such export markets as Latin America and Asia because China's recent currency swap arrangements will enable yuan to be used in trade settlements," the ministry said in the statement.

China has grabbed the media headlines around the world in the past for its fast emergence as a driver of global economic growth and more recently as the potential saviour of the global economy mired in the worst recession in many decades.

"In response to the spreading 'Beijing Consensus', our country also needs to adopt pre-emptive external economic policy," the finance ministry said, referring to a phrase used to describe China's growing influence.

Analysts in Seoul said South Korea lacked the economic scale or resources to compete with China in global markets and should therefore focus its diplomatic and economic capabilities in select areas where it excels.

"China would pay much higher prices than the market value when acquiring energy projects abroad, so (South Korea) can't compete with it," said Park Bun-soon, a senior fellow at Samsung Economic Research Institute.

"If China has 'hard power', we have to think about utilising 'soft power'," he said, referring to South Korea's non-government organisations and corporate networks.

The finance ministry's statement also came after South Korea's efforts to secure more offshore energy supplies hit a snag early this year after Nigeria cancelled exploration rights at oilfields first awarded in 2005.

South Korea, which lacks natural resources, has relied heavily on exports to power its rise after the 1950-53 Korean War to become the world's 13th-largest economy.

But Chinese industry has emerged as a strong competitor in key export markets for products ranging from clothes to consumer electronics, sparking concerns it could jeopardise South Korea's efforts to catch up with the world's most developed economies.

China, with which Seoul normalised diplomatic ties in 1992, has become South Korea's biggest trade partner and main investment destination.

China's average income per person stands at only about one-eighth of South Korea's but the world's most populous nation ranks as the world's third-largest economy with output three times as big as Korea's, World Bank figures show.

South Korea's two-way trade volume with China amounted to $168 billion in 2008, accounting for a fifth of its total trade volume, and nearly 20,000 South Korean companies were operating in China, government figures show.