China’s overcapacity is already damaging Korean firms, while experts note rising anti-China sentiment could also trigger domestic consumer backlash.
As Chinese leader Xi Jinping prepares for his meeting with South Korean President Lee Jae Myung, experts say Seoul is vulnerable to economic coercion, overcapacity, and domestic consumer backlash if the two countries continue on the path of strengthening economic ties.
Xi will arrive in South Korea on Oct. 30 for a three-day state visit—his first in 11 years.
Although Xi’s trip is centered on the Asia-Pacific Economic Cooperation (APEC) meetings, he is also scheduled to meet with Lee on Nov. 1.
The South Korea-China summit may cover issues such as bilateral ties, the Korean Peninsula, supply chains, technology cooperation, market access, and people-to-people exchanges, reported The Chosun Daily, the English-language outlet of Korean newspaper The Chosun Ilbo.
China remained South Korea’s largest trading partner for the 21st consecutive year in 2024, while South Korea reclaimed its spot as China’s second-largest trading partner. Bilateral trade reached $328.08 billion that year, data from Chinese state media CGTN showed.
Korean Autos Under Threat
When Xi last visited South Korea, bilateral relations were at their strongest, and the trip resulted in the implementation of the Korea-China Free Trade Agreement (FTA) in 2015.
However, Tsai Ming-fang, a professor at the Department of Economics and Industrial Economics at Tamkang University in Taiwan, noted that South Korea’s $18 billion trade deficit with China in 2023—eight years after the FTA—signals the potential risks for Seoul in continuing on a path of deepening economic ties with Beijing.
“If South Korea seeks closer economic ties with China at this meeting, it risks becoming a new market for China’s overcapacity, as China actually needs foreign markets right now more than the other way around,” Tsai told The Epoch Times.
China’s overcapacity has already dealt a heavy blow to South Korea’s heavy and chemical industries. This decline is starkly evident in LG Chem, a leading South Korean chemical company, whose operating profit plunged from nearly 1 trillion won ($701.2 million) in 2022 to just 1.2 billion won ($842,330) in the first half of 2024.
This pressure from Chinese oversupply has also forced other major firms, including battery maker Samsung SDI and Posco Future M, the battery manufacturing arm of the Posco Group, to sell off business units to stem the losses, Business Korea noted.
Tsai said that with China’s economic outlook remaining bleak and the European Union and United States already imposing anti-dumping and anti-subsidy tariffs on various Chinese goods, this only exacerbates concerns about China’s overcapacity and flooding of global markets.
“With its access to the EU and U.S. markets restricted, China will undoubtedly seek other partners to offload its products. If South Korea becomes a target, I believe its steel and automotive sectors will face the greatest impact,” Tsai said.
He Jiang-bing, a financial commentator, also cautioned that the crushing pressure from Chinese overcapacity threatens to cripple South Korea’s flagship auto industry, which would severely undermine its export strength and market competitiveness.
“If Chinese-made electric vehicles are priced too low, as we’ve seen in Europe, local consumers will simply buy Chinese brands like BYD. As a result, South Korean domestic car sales will plummet, potentially devastating both the EV and traditional diesel markets,” He told The Epoch Times.
By Jarvis Lim
