ㅇ China's sizable trade deficit with Korea is an unavoidable outcome caused by the different stages of 
economic development and the difference in the industrial structure between Korea and China.

 - The trade in processed goods makes up a significant portion of trade with China, which is based on 
an abundance of cheap labor. Korean companies in China are mostly importing intermediary goods and 
subsidiary materials from Korea, thereby leading to China's huge trade deficit with Korea.

 - China's imports of intermediary goods and subsidiary materials from Korea eventually contribute to 
expanding China's exports and creating jobs in China.

                                                                                                                    (Unit : US$100 million)

	2000	2001	2002	2003	2004	2005
Korea statistics	59	49	64	132	202	233
China statistics	119	109	131	230	344	417

                                    
                                  out of Korean manufactured goods exported to China

Year	2000	2001	2002	2003	2004	2005
Percentage	76.8%	78.3%	69.1%	72%	79.7%	82%

ㅇ With the market economy system in full operation in Korea, the Korean Government has limitations in 
alleviating the imbalance in bilateral trade with China. However, Korea is of the view that it is desirable to 
achieve balance in bilateral trade by expanding the bilateral trade volume. In this regard, Korea has been 
making efforts to duly reflect China's requests such as the dispatch of "buy Chinese products" missions 
to China, etc.

 

ㅇ The trade imbalance between Korea and China should not simply be understood in the context of 
commodities trade, but also in the context of the overall economic and trade relations between Korea and 
China.

 

- In addition to commodities trade, the invisible trade balance including tourism and expenses related to 
studying abroad have benefited China. Moreover, Korean companies' contribution to the Chinese 
economy in terms of expanding exports to the third countries and increasing employment in China must 
be assessed fairly.Korea, more than any other country, has an open mind concerning technology 
transfer to China.

 

- The trade imbalance between Korea and China is expected to be gradually resolved in the mid and 
long-term with China's technology advancement and increase of components' localization.

 

ㅇ According to one of the Korean research institutes, with the advancement of Chinese technology in the 
future, Korean exports of intermediary goods and raw materials, which occupies about 80 percent out of 
Korea's total exports to China, will progressively be substituted by products "Made in China", tipping the 
bilateral trade imbalance in China's favor.