{"id":410788,"date":"2026-02-06T07:56:09","date_gmt":"2026-02-06T07:56:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/410788\/"},"modified":"2026-02-06T07:56:09","modified_gmt":"2026-02-06T07:56:09","slug":"china-economic-rebalancing-to-test-koreans-before-benefiting-them","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/410788\/","title":{"rendered":"China economic rebalancing to test Koreans before benefiting them"},"content":{"rendered":"

China is paradoxical. Two incredibly different narratives can be correct at the same time: its economy is slowing sharply<\/a>, and its exporters are becoming an even bigger competitive force<\/a>.<\/p>\n

But this contradiction is not really a contradiction. A development model that helped turn China into the world\u2019s second-largest economy<\/a> \u2013 built on high investment, weak household consumption and powerful industrial policy \u2013 can hit its limits without disappearing overnight.<\/p>\n

As the old growth engine sputters, Beijing is leaning harder on exports and industrial upgrading to keep growth stable<\/a>. For South Korea, that means the short-term problem is not just that China buys less. It is also that China sells more, and increasingly in the very product categories the Koreans depend on.<\/p>\n

While the short-to-medium-term impact on Korean industrial giants will be great, the transition will not last forever. If China ultimately succeeds in rebalancing toward consumption, South Korea \u2013 and the world \u2013 could benefit from a larger, more open Chinese market and a global economy with more demand.<\/p>\n

China\u2019s development should be a bit familiar to any Koreanist: a rapid, sustained rise in GDP and living standards built on a close, collaborative relationship between the state and business, guided by industrial policy in high-value-added sectors and funded by high savings and constrained wages.<\/p>\n

Where the analogy breaks down is that South Korea\u2019s macroeconomic imbalances never got as severe as China\u2019s<\/a>.<\/p>\n

The scale of China is massive. South Korea\u2019s population<\/a> is less than the number of workers on the Chinese government payroll<\/a>. With the Chinese scale comes delegation and decentralization. In the heyday of South Korea\u2019s developmental state, Park Chung-hee and the Economic Planning Board (EPB) were able to steer the whole economy from the Blue House. China relies on the provinces<\/a>.<\/p>\n

Beijing gives targets based on its priorities, and local cadres have key performance indicators to hit. Ever since reform and opening started in 1978, the priority has been growth in GDP. In fact, China did not and does not just measure its GDP \u2013 it targets it. Meaning that, in a locality, if household consumption and private business investment do not hit the GDP target, the government by building a new bridge or subway line can make up the difference.<\/p>\n

This was great when China was poor, its infrastructure was weak and its investment needs were vast<\/a>. None of these is true anymore \u2013 yet China\u2019s high savings-investment, weak consumption mode of development has not caught up with its new reality. Instead, its investment is, while not growing as strongly as before<\/a>, increasingly becoming unproductive. And its debt burden is skyrocketing.<\/p>\n

Instead of increasing consumption \u2013 which would require increasing wages and the household sector\u2019s share of national income, which would require the politically difficult task of reducing a different sector\u2019s share of GDP \u2013 Beijing is turning towards pushing its excess abroad<\/a>. This matters for South Korea since it means direct competition for its firms in autos<\/a>, petrochemicals<\/a> and semiconductors<\/a>.<\/p>\n

Despite the external turn to solve internal problems, Beijing understands \u2013 and wishes to solve \u2013 its imbalance. In 2025, boosting domestic consumption was its top priority. It has signaled that in 2026 it will double down on it.<\/p>\n

However, it has not quite targeted the main cause of its weak domestic consumption. Chinese households consume so little, but not because they save too much \u2013 they earn too little. China\u2019s household sector\u2019s share of national income is very low compared with its international peers. In 2023, it was just 44%, compared with the United States\u2019 73<\/a>%.<\/p>\n

Nevertheless, boosting the household sector\u2019s share of national income will be a decades-long undertaking \u2013 one that Beijing will treat with great caution, due to its political sensitivity.Increasing one sector\u2019s share of national income requires reducing a different sector\u2019s share.<\/p>\n

But, in fact, the grass is indeed greener on the other side. China\u2019s transition will take time, but China\u2019s, South Korea\u2019s, and the world economy will be stronger because of it. Currently, China runs a large trade surplus with the rest of the world, meaning it solves its weak domestic demand with demand abroad<\/a>. If it is successful in raising consumption, China will add more demand while easing the global competitive pressures that have strained other economies<\/p>\n

In this scenario, South Korean exports would find wider markets, globally and in China, and more breathing room for R&D spending. This would benefit China, Korea and the world. But it will not happen overnight.<\/p>\n

Until then, Seoul should support its firms that are facing fierce competition by using export subsidies for the global market and tariffs for its home market \u2013 of course, utilizing the WTO framework. Yet these will be temporary measures.<\/p>\n

China will rebalance, as its economic health depends on it.<\/p>\n

Anthony William Donald Anastasi PhD is a lecturer (assistant professor) of economics at the Sino-British College, University of Shanghai for Science and Technology.<\/p>\n","protected":false},"excerpt":{"rendered":"China is paradoxical. Two incredibly different narratives can be correct at the same time: its economy is slowing…\n","protected":false},"author":2,"featured_media":410789,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[18341,84,18343,18345,152464,1294,152465,56,54,55],"class_list":["post-410788","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-block-2","tag-business","tag-china-economy","tag-china-exports","tag-chinese-economic-rebalancing","tag-economy","tag-south-korea-china","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/410788","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=410788"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/410788\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/410789"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=410788"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=410788"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=410788"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}