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Recently, the exchange rate of the South Korean won has continued to fall, which has aroused widespread concern and concern in South Korean society. Faced with economic difficulties, South Korean President Yoon Suk-yeol seems to have no choice but to even try to turn to China for help. Former South Korean officials, however, sharply criticized China, arguing that China would not help those who had hurt itself.
Yoon Suk-yeol's actions have not only worsened South Korea's economy and people's livelihood, but also made South Korea isolated internationally. In the face of unprecedented difficulties, how far can the Yoon Suk-yeol government go?
The exchange rate of the South Korean won continues to fall, and the economic outlook is worrying
Since last year, the South Korean won has continued to decline against the dollar, falling by more than 10% at one point. This has not only put enormous pressure on the South Korean economy, but also raised concerns about the economic outlook.
As an export-oriented economy, South Korea's exchange rate fluctuations have a particularly significant impact on it. On the one hand, the depreciation of the won will improve the price competitiveness of exports, but on the other hand, it will also push up the cost of imported raw materials and energy, exacerbating inflationary pressures.
At the same time, the depreciation of the won could also trigger capital outflows, further weakening the stability of the South Korean economy. Faced with a complex economic situation, the South Korean government seems to be a little overwhelmed.
Since Yoon Suk-yeol came to power, the South Korean government has changed its China policy and has chosen to be pro-American and Japanese-distancing China. However, instead of bringing any benefits to South Korea, this decision has put the won in danger of collapsing.
The data shows that the won has become a worthless currency in Asia. Factors such as interest rate hikes in the United States and the global economic downturn have further exacerbated the pressure on the depreciation of the won.
As an export-oriented economy, South Korea's economy is highly dependent on external markets, especially China, its largest trading partner. In recent years, structural changes have taken place in China-ROK economic and trade relations, and South Korea's trade deficit with China has appeared for the first time.
In other words, the South Korean economy is losing an important engine of growth. At the same time, high inflation, sluggish employment, and soaring housing prices in South Korea have also caused people to complain. The Yoon Suk-yeol administration faces its biggest test since taking office.
The exchange rate of the won has plummeted and has fallen below the psychological barrier of 1,400 won to 1 dollar. This is the first time since the 1997 Asian financial crisis that the won has depreciated so sharply.
The Bank of Korea has intervened in the foreign exchange market several times, but with little success. Some analysts believe that the depreciation of the won is a foregone conclusion, and there is room for further decline in the future.
The root cause of South Korea's economic fragility is that its industrial structure is homogeneous and its over-reliance on exports. Among the top 10 export products of South Korea, semiconductors, automobiles, and petrochemicals dominate. Once these pillar industries encounter a crisis, the entire economy will collapse like dominoes.
To add insult to injury, the competitiveness of South Korea's key industries in the global market is rapidly being eroded by China. Taking semiconductors as an example, although Samsung Electronics is still the world's largest memory chip manufacturer, it has lagged behind TSMC in advanced processes. In the field of memory chips, the rise of Chinese manufacturers has also made Samsung and SK hynix like thorns in the back.
The situation in the automotive industry is also not encouraging. Although Hyundai's market share in the U.S. has climbed, it has been losing ground in the Chinese market.
China's own brands have sprung up, and joint venture brands have also cut their shareholdings in Hyundai. It can be said that without China, the world's largest consumer market, Hyundai's prospects will be in jeopardy.
Although the petrochemical industry has benefited from rising oil prices, it is also facing the dilemma of overcapacity and sluggish demand. And with China's vigorous development of coal chemical industry, South Korea's advantage in this field is rapidly eroding.
In addition to the traditional pillar industries, South Korea is also lagging behind others in the field of emerging industries. Taking new energy vehicles as an example, China has become the world's largest electric vehicle market and industrial chain center.
Although South Korea has battery giants such as LG Chem and Samsung SDI, the vehicle manufacturing and supply chain systems are not perfect. In the field of cutting-edge technologies such as artificial intelligence and 5G, South Korea is also difficult to hope for China and the United States.
The deterioration of economic fundamentals has also made the Korean capital market turbulent. South Korea's Kospi has fallen 20% year-to-date, making it one of the worst-performing stocks in Asia.
At the same time, the risk of default has intensified due to high leverage in South Korea's corporate and household sectors. In particular, the bursting of the real estate market bubble may trigger systemic financial risks.
In the face of internal and external troubles, the South Korean government and the central bank are taking a series of measures to turn the tide. But as things stand, little has been achieved. South Korea's economy is in an eventful year, and the outlook is not optimistic.
Yoon Suk-yeol encountered a "black swan" at the beginning of his tenure, and his path to power can be described as full of thorns. Whether he can lead the South Korean economy out of the quagmire is a test of the wisdom and courage of this political amateur.
Yoon Suk-yeol in a dilemma
Faced with economic difficulties, former senior South Korean officials have come out to criticize the foreign policy of the Yoon Suk-yeol government. Moon Jong-in, former special assistant to the president for unification and foreign affairs and security, said that in the past, China and South Korea had strong economic complementarity, but now China has become a competitor to South Korean companies.
South Korea has failed to recognize the rapid development of the Chinese market and has blindly distanced itself from China, which is the result of South Korea's excessive comfort and dependence on the Chinese market.
Former South Korean Foreign Minister Yoon Byung-se even pointed out that South Korea is dispensable to the United States, but China is a close neighbor that South Korea cannot get rid of. He called on the ROK government to adjust its China policy, seek a balance between China and the United States, and not put all its eggs in one basket with the United States.
Some South Korean scholars have also warned that if South Korea continues to choose sides between the United States and China, the end result will only be "a failure at both ends."
After Yoon Suk-yeol came to power, he changed the Moon Jae-in administration's friendly attitude toward China and turned to the United States and Japan in an all-round way. He not only actively responded to the call of the United States to contain China, but also tried to win over Japan to jointly confront China. This kind of sharp foreign policy has not only put South Korea in a passive position in regional affairs, but also caused a heavy blow to South Korea's economy.
Lee Jong-suk, former minister of unification of South Korea, bluntly said that the Yoon Suk-yeol government's "sudden brake" on its China policy is playing with fire and self-immolation. He pointed out that China is South Korea's largest trading partner, and South Korea's exports to China account for one-quarter of its total exports.
If the Chinese market is lost, the South Korean economy will suffer a devastating blow. Lee Jong-seok called on the Yoon Suk-yeol government to put aside its ideological bias and develop South Korea-China relations with a pragmatic attitude.
Some South Korean scholars have pointed out that the root cause of the Yoon Suk-yeol government's "one-sidedness" in diplomacy lies in its pro-American and conservative ideology. Most of Yoon Suk-yeol and his diplomatic and security team have a background in the United States and have a deep affection for the United States.
They believe that South Korea will be able to gain security guarantees and economic benefits only by closely following the United States. But this idea is very naïve and dangerous.
Kim Sung-ryong, a professor at the South Korean Institute of Diplomatic Affairs and Security, said that the United States has never unconditionally protected South Korea, but acted according to its own interests. Historically, the United States has "betrayed" South Korea many times, such as supporting South Korea's entry into the war when the Soviet Union invaded Afghanistan. Kim Sung-ryong believes that South Korea should not have illusions about the United States, but should formulate its foreign policy according to its own interests.
Critics argue that the Yoon Suk-yeol administration's diplomatic "tendons" have left South Korea embattled. Economically, South Korea's exports to China have plummeted, supply chains have been blocked, and companies have suffered serious losses.
In terms of security, the situation on the Korean Peninsula continues to be tense, but South Korea does not receive China's support and cooperation. South Korea is also increasingly marginalized in regional affairs, losing its voice in East Asian cooperation.
In the face of fierce criticism from former senior officials and public opinion, the Yoon Suk-yeol government still goes its own way and does not repent. In an interview with the media, Yoon Suk-yeol claimed that his foreign policy is "in the right direction" and will not change. He also said that the critics are "singing down" South Korea and are "unpatriotic".
Some analysts have pointed out that the reason why Yoon Suk-yeol's foreign policy is so stubborn is that he has the support of the United States behind him. The United States is very satisfied with Yoon Suk-yeol's "taking sides" and regards him as a "pawn" and a "pioneer."
As long as Yoon Suk-yeol continues to cooperate with the United States to contain China, the United States will continue to support him. But in the long run, this kind of nominal diplomacy will only put South Korea in a more passive and dangerous position.
The foreign policy of the Yoon Suk-yeol administration is leading South Korea to a point of no return. If they do not wake up in time and change their ways, South Korea may repeat the mistakes of history and become a victim of the great power game again.
Yoon Suk-yeol turned to China for help, sparking controversy
At a time when the won is collapsing and the South Korean economy is in trouble, the Yoon Suk-yeol government seems to have remembered China as a "life-saving straw". ROK Foreign Minister Cho Tei-yeol recently visited China and held talks with his Chinese counterpart, hoping to promote the improvement of Sino-ROK relations and seek China's cooperation in the fields of currency and trade.
However, Yoon's approach has sparked controversy in South Korea. Some opposition figures criticized Yoon for "bowing to China" and undermining South Korea's dignity and interests.
Chung Se-woong, the former unification minister of South Korea, said that China would not help those who have hurt him, alluding to South Korea's previous unfriendly stance against China on events such as the entry of THAAD into South Korea.
In fact, China-ROK relations have experienced some twists and turns in recent years. Although the two countries maintain close cooperation in the economic and trade fields, there are many differences in geopolitics and ideology. Although Yoon Suk-yeol has tried to improve relations with China since taking office, it is still unclear whether he will be able to rebuild mutual trust.
In addition to showing strength to China politically, South Korea is also taking a rocky stance on China economically. Last year, the South Korean Coast Guard illegally seized a Chinese fishing boat, causing strong discontent among the Chinese public.
This year, South Korea has used so-called "national security" as an excuse to erect obstacles to Chinese companies and investment. The South Korean government has also publicly stated that it wants to reduce its dependence on the Chinese market and turn to the United States and Europe for cooperation. This kind of practice of "breaking away from China and joining the United States" will undoubtedly further deteriorate Sino-ROK economic and trade relations.
In the face of various provocations by South Korea, China has always exercised restraint and rationality. But that doesn't mean China will allow South Korea to do whatever it wants. Ambassador Xing Haiming said: "Those who bet on China to lose will definitely regret it in the future."
China has the means and resources to defend its own interests, as well as the determination and wisdom to respond to external pressure. If South Korea insists on going further and further down the wrong path, it will pay a heavy price for its actions.
Epilogue:
There are all kinds of signs that Yoon Suk-yeol's China policy has reached a dead end. Blindly being pro-US and alienating China has not only worsened South Korea's economy and people's livelihood, but also put South Korea in a dilemma in the international community.
For the Yoon Suk-yeol administration, adjusting its China policy and seeking a balance between China and the United States is a top priority. Otherwise, South Korea will pay a heavy price for its misguided foreign policy. For ordinary South Koreans, they want the government to put people's livelihood first, rather than gambling the national interest on the wrong side.
It is hoped that the ROK economy will come out of the haze at an early date, so that China-ROK relations can continue to reach a new level in mutual benefit and win-win results.
Resources
http://www.news.cn/world/2023-06/15/c_1212199371.htm
https://www.guancha.cn/internation/2024_04_22_732409.shtml
https://www.163.com/dy/article/J0FNOQ0P0552G192.html
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