US-China gap widens to record in South Korea’s current account

THE gap between the US and China in South Korea’s current account widened to a record last year, underscoring the pace of change in Seoul’s trade relations with the world’s two biggest economies.

South Korea recorded an all-time current account surplus of US$91.2 billion with the US while posting a record deficit of US$30.9 billion with China in 2023, according to data released on Wednesday (Jun 19) by the Bank of Korea. That marks the biggest difference between the two nations in central bank data going back to the late 1990s.

The US surpassed China in South Korea’s current account in 2020 and has held that position ever since. The record difference last year comes as South Korea bolsters its relations with the US under President Yoon Suk Yeol, who assumed office in 2022 after his predecessor Moon Jae-in sought more diplomatic balance between Washington and Beijing.

The current account paints a comprehensive picture of a nation’s profits or losses in trade and other financial transactions. The growing shortfall with China is likely to fuel more questions for policymakers in Seoul as the world’s second biggest economy becomes less reliant on South Korea for goods and services. China has been the biggest trading partner for South Korea, providing a key source of economic growth.

The US is meanwhile broadening its ties with South Korean technology giants such as Samsung Electronics and SK Hynix, providing subsidies for plant construction on its soil among other initiatives. Washington has also bolstered security pledges for Seoul as North Korea beefs up its military exchanges with Russia and China.

The strengthening of Seoul-Washington ties coincides with US efforts to restrict the flows of advanced technology to China through export controls as the two compete in fields such artificial intelligence and electric cars that are key to their security and economic future.

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The US-China gap in South Korea’s current account may widen further this year as American demand for South Korean products such as semiconductors rises while Beijing struggles to recover from a consumption slump that has sapped appetite for imports. BLOOMBERG