The core of the Lee Jae-myung administration's governance stance is "growth." This is the sharpest contrast with the existing progressive camp, for which redistribution was a golden rule. In terms of method, corporations take the lead and the government backs them up. This is also the basis for President Lee describing himself as centrist conservative.
At the center of this corporation-led growth policy is Ha Jun-kyung, the presidential office's senior secretary for economic growth. A macroeconomist from the Bank of Korea, he is a scholar who was called "Lee Jae-myung's economic brain." He holds the key to leading the president's declared expansionary fiscal policy, activating the capital market, establishing national support measures for strategic industries, and finding a balance between national debt and the role of fiscal policy.
In an interview with ChosunBiz on the 18th, Senior Secretary Ha, addressing the government debt-to-GDP ratio hitting an all-time high, said, "What matters is improving the efficiency of government spending; the national debt ratio itself does not tell you everything. If you assess by the ratio alone, you can make a wrong judgment." Noting that government debt exceeded 100% in the United States and other countries during World War II, he added, "In war, you borrow money if you must and fight to win. Once you win, you get an opportunity later to restore fiscal soundness."
He said we should not shun the role of fiscal policy out of fear of debt, adding, "If the country disappears because we tighten our belts without fighting, it means nothing." He continued, "If we spend money productively now to resolve the severe low birthrate and shrinking opportunities for young people, fiscal sustainability will rise and, ultimately, soundness will improve." This aligns with President Lee's stance on issuing 100 trillion won in Government Bonds: "If we don't have seeds, we'll borrow them and sow."
◇ "Pinching pennies on fiscal spending funneled money to one side… We need productive finance"
According to the Bank of Korea, domestic private-sector debt (household and nonfinancial) reached 207.4% of Korea's GDP in 2023. That is similar to Japan's bubble-economy level in 1994 (214.2%). There is growing concern that excessive private debt is hobbling economic growth.
Senior Secretary Ha assessed, "As policy has flowed toward 'not spending' as much as possible, money has ended up flowing to just one side, such as real estate." As policymakers tried to use finance instead of fiscal spending to implement policy, financial institutions had little choice but to prefer "safe" real estate, he said. "It is the government's role to move that money productively, but because that has not gone smoothly, imbalances have piled up," he said.
Senior Secretary Ha said, "Our government must solve this. So-called 'productive finance' is our biggest task." He described productive finance as moving money to new capital such as jobs instead of rent, and said the previous rent-seeking–oriented economy is intertwined with today's low-growth phase.
◇ Launch of pan-government "real estate market watchdog"
The market is also watching the Lee Jae-myung administration's real estate policy. Following the June 27 lending curbs that suppressed demand, the Sept. 7 package signaled large-scale supply. The main point is to supply 1.35 million new homes in the Seoul metropolitan area over five years. The administration has repeatedly vowed not to repeat the Moon Jae-in government's missteps on real estate. It says it will not use taxes to control home prices, but will strictly crack down on unfair market practices while rolling out repeated demand-suppression measures.
To that end, Senior Secretary Ha said a pan-government "real estate market watchdog" will be launched. Relevant agencies including the police, the National Tax Service, and the Ministry of Land, Infrastructure and Transport will take part. "We will enable monitoring of unfair and illegal aspects of the real estate market," he said, adding, "We plan to respond thoroughly to market distortions." He also said, "What will be different from the previous government is doing it 'watertight,'" and, "We will identify gaps that were excluded from or exploited under regulations such as jeonse loan programs."
◇ "Fuel for advanced industries" 150 trillion won National Growth Fund to launch in December
The National Growth Fund, a presidential pledge, will be expanded sharply to 150 trillion won and will launch in December this year. Over five years, the government and the private sector will each contribute 75 trillion won to invest in advanced strategic industries such as AI (artificial intelligence), biotech, robotics, and semiconductors. The government aims to achieve a potential growth rate of 3% within the term through large-scale investment. As the manufacturing crisis deepens, the fund will serve as "fuel" to upgrade overall industrial capabilities, Senior Secretary Ha said.
Government finances will be injected through the Korea Development Bank's Advanced Strategic Industry Fund. The investments will use government-guaranteed bonds. The amended Korea Development Bank Act (KDB Act), which contains provisions to create the fund, takes effect on Dec. 10. The fund will also launch around that time. Full-scale investment will begin next year, Senior Secretary Ha said.
"Even when corporations want to do something, they cannot bring themselves to invest in AI infrastructure and the like," Senior Secretary Ha said. "This fund will be used to channel money into new industries, revive entrepreneurship, and spur startups."
He also said the government portion will participate relatively in a junior tranche and the design will allow ordinary people to earn stable returns, adding, "From the public's perspective, we made it so they feel it is better than similar funds in the past."
◇ "With a $350 billion fund, financial market instability in FX—U.S. would not want that either"
Regarding talks on a $350 billion (about 487 trillion won) U.S.-bound investment funds agreed with the United States, he said, "It could become a risk factor for our foreign exchange market," but added, "The United States would not want Korea's FX market to become unstable either." In follow-up tariff negotiations, the U.S. side is pushing for direct cash investments, while Korea is advocating a "financial package" in the form of loans and guarantees. In Japan's case, which negotiated ahead of us, if the United States arbitrarily designates an investment target, funds must be sent within 45 days.
Senior Secretary Ha said, "Looking at FX market movements since the tariff deal was concluded on Jul. 30, the exchange rate has been moving a bit differently," adding, "I think the (U.S.-bound investment fund) is already affecting the FX market." The point is that a large investment conducted in dollars will spike demand for currency exchange and lead to a decline in the won's value. The $350 billion equals 70% of Korea's budget this year and 84% of its foreign reserves.
"If sending money to the United States for the investment destabilizes our FX market and causes problems, that also causes problems for the U.S.," Senior Secretary Ha said, adding, "The U.S. would not want that either." On whether the United States will honor its promise of most-favored-nation treatment for semiconductors, he said, "Talks are proceeding well under the principle of good faith."
◇ "Humane debt relief—that is what policy finance is for"
Recently, President Lee proposed at a Cabinet meeting to "raise rates for high-credit borrowers and lower rates for vulnerable groups." The idea is to add 0.1% to customers with high credit who already receive low rates, and use that to lend at low rates to those with insufficient repayment capacity. In terms of humane relief, it is similar in intent to the "debt relief program for vulnerable borrowers" included in the new administration's supplementary budget. However, concerns were also raised that it could create relative deprivation among diligent payers and lead to moral hazard.
Senior Secretary Ha said in response, "If, under the banner of inclusive finance, you lend at interest rates that people can never repay, they will never be able to pay back and their credit rating will keep falling. In the end, they give up everything they have and become slaves to debt," adding, "Finance is an industry that receives a privilege from the state to create money under license—how can it engage in such 'predatory finance'?" He also said, "Because we cannot help solely through fiscal policy or welfare, policy finance was created," adding, "Finance should help people become self-reliant. Only then is the finance industry sustainable."
◇ Stablecoins that could shake monetary sovereignty… "We are reviewing the risks"
The "Genius Act," which recently passed the U.S. Congress, is directly tied to countries' "monetary sovereignty." While it sets the legal standards and status for dollar-based cryptocurrencies, it effectively reflects Trump's strategy to further cement dollar hegemony. Although President Lee pledged to legislate "won-based stablecoins," it is difficult in the global currency market to secure the won's competitiveness itself. The European Union and others are even pursuing legislation to curb the expansion of dollar-based stablecoins.
Senior Secretary Ha said, "We recognize that stablecoins have the potential to exert major influence across all areas, including finance, currency, and payments and settlements," adding, "We are closely reviewing the most important elements related to consumer and user protection." However, he said the discussions have not progressed to a concrete or finalized stage. "We are not at a point where we can give a definitive answer regarding responses to dollar hegemony and other issues," he said, "but we are not sitting on our hands. We are closely examining the risks."
On easing the separation of banking and commerce regulations for "corporate venture capital (CVC)" sought by the financial sector and corporations, he said, "Separation of banking and commerce is necessary because balanced development of finance and industry is important," adding, "If that (existing system's) purpose is not undermined, we can review the need." However, he added, "We are not yet at the stage of saying exactly how we will do it," and said, "There are principles, so we will review whether it can help the economy while keeping the balance between finance and industry."