Toward Rivalry and Decoupling: South Korea's Changing Economic Dynamics with China

Over the past decade, Sino-Korean relations have been based on strong economic interdependence and mutual reciprocity. However, the post-pandemic era (2022-2023) marks a critical turning point as the mutually beneficial and complementary model between China and Korea has undergone a fundamental shift. In 2023, the latter's trade balance with the former transitioned from a surplus that had sustained for 30 years to a deficit. This transformation is driven by multiple factors, including the US-China global rivalry, the latter's accelerated technological advancements and growing industrial self-sufficiency, and Korea's strategic distancing from it. This study examines the evolving dynamics of Sino-Korean economic relations, highlighting a transition from strategic partnership to emerging rivalry and decoupling. The changing dynamics between the two nations reflects a synergistic interplay of their politico-economic policy choices. From China's perspective, rapid advancements in high-tech industries and enhanced technological capabilities have eroded Korea's competitive edge in mid- to high-tech sectors, intensifying exports and industrial competition. From Korea's perspective, the Yoon Suk-yeol administration shifted away from its previous hedging strategy amid escalating Sino-US competition, fostering closer collaboration with the United States and regional allies in Asia. South Korea's state-driven reshoring efforts, supply chain diversification strategies, and participation in frameworks such as the Indo-Pacific Economic Framework aim to reduce economic reliance on China.