Although trade tensions between the United States and China have continued, an analysis found that Korea has maintained economic consolidation with both the United States and China by using third-country production networks.
On the 13th, the Bank of Korea (BOK) said in its issue note "How is the global economic linkage being reorganized amid geopolitical fragmentation?" that Vietnam, India, and Mexico are emerging as intermediate hubs in global production and procurement networks. The Bank of Korea (BOK) examined the Organization for Economic Cooperation and Development (OECD) Inter-Country Input-Output Tables from 2016 to 2022 to track which country's consumption and investment ultimately increased after value added created domestically went through overseas production and processing.
According to the analysis, the share of value added that Korea earned from exports to Vietnam that was consolidated into U.S. consumption and investment rose from 11.1% in 2016 to 18.5% in 2022. During the same period, the share consolidated into China's consumption and investment increased from 7.3% to 13.9%. In particular, in computers, electronics, and optical equipment, including semiconductors, the share consolidated into the United States during the same period increased from 12.8% to 21%. The Bank of Korea (BOK) said, "Through Vietnam's production network, the share of Korea's value added consolidated into the final demand of the United States and China both increased."
The flow in which Korean value added was directly consolidated into U.S. final demand was 73.1% in 2016 and 72.4% in 2022, remaining largely unchanged. However, in the indirect route where Korean intermediate goods pass through third-country production bases before reaching the United States, the share via Vietnam and other ASEAN-5 countries grew from 4.9% to 6.3%. This was also pronounced in computers, electronics, and optical equipment, including semiconductors.
The Bank of Korea (BOK) said, "Despite recent geopolitical fragmentation, economic linkage between countries is proceeding not by being cut off but by reorganizing the existing global supply chain routes." It added, "We need to jointly manage the possibility that policy changes in major countries or supply chain shocks will spill over domestically through third-country production networks," and "It is necessary to diversify supply chains to reduce dependence on specific production hubs or routes."