Korea Trade Association (KITA): Introducing National Security Law to Hong Kong: Impact on South Korean exports
June 02, 2020
Chinese government:
At the National People’s Congress on May 28, the government adopted a policy to introduce “National Security Law” in Hong Kong, which strictly controls anti-establishment activities.
In response to this, the United States strongly opposed and announced measures such as terminating the preferential treatment, such as the trade aspect, which was recognized in Hong Kong.
Korea Trade Association:
On May 29, the US-China confrontation regarding the introduction of national security law in Hong Kong and its impact on Japan’s exports were announced.
Intensifying conflict between the United States and China:
If Hong Kong’s logistics and financial hub functions weaken, it will be inevitable that South Korea’s exports, which have used Hong Kong as a transit trading base, will also have an impact.
Korea Trade Association Report:
Hong Kong is the fourth largest export destination of South Korea ($28.1 billion, 2019),
98.1% of Hong Kong’s re-exports originating in South Korea
Exported from South Korea to China.
Traditional advantages:
Korean companies have used Hong Kong as an export and investment channel for China.・
Until now, We have enjoyed stable financial and logistics infrastructure and taxation system in Hong Kong.
However, the US-China conflict is likely to lose these advantages.
Future disadvantages:
From now on, “when transit trade in Hong Kong becomes difficult, Korean companies will be forced to switch to direct export to China.”
Negative impact on semiconductor exports:
In other words, 70% of South Korea’s exports to Hong Kong are semiconductors.
Expected to increase logistics costs for small and medium-sized export companies excluding large companies.
For items such as cosmetics and agricultural and marine products, customs clearance/quarantine in China is much more complicated than in Hong Kong.
It is expected that customs clearance will be hindered when converting to direct export to China.
Meanwhile, the report also points out the positive side.
Future profits: Exports to the US
“If China’s export route to the US via Hong Kong is closed due to the expansion of the US-China conflict”
Petrochemicals and home appliances that compete with China,
Medical/precision, optical equipment,
Steel products, etc.
By exporting to the US, Korean companies can secure a relatively competitive advantage.
Currently, in the smartphone and communication equipment market, which is in a competitive relationship with China under sanctions against China in the United States,
analyzes that the share of Korean companies in the world market will increase.
-JETRO
https://www.jetro.go.jp/biznews/2020/06/0fbcdf5fb8ee4304.html
Worsened conflicts between U.S. and China over Hong Kong to undermine S. Korea’s export :
As the tensions between the U.S. and China regarding the enactment of the Hong Kong National Security law grow,
their impact on the export of South Korea, which uses Hong Kong as the hub of intermediate trade, seems unavoidable.
Hong Kong
is an important hub of South Korean businesses’ intermediate trade to reexport to China, the international trade and commerce research center of the Korea International Trade Association (KITA) reported on Friday.
Hong Kong has easy access to mainland China and features various tax benefits,
- such as value-added tax refund,
- low corporate tax, and
- tax exemptions,
as well as outstanding trade infrastructure, which is why logistics movement from South Korea to Hong Kong to China is very active at the moment.
Last year alone,
over 90 percent of exports from South Korea to Hong Kong eventually went to their destinations in mainland China.
In addition, the U.S. has granted
a special trade status to Hong Kong in terms of issuing visas, attracting investment, and enforcing laws since 1992,
which has played an important role in the growth of Hong Kong as one of the major finance and logistics hubs in Asia.
The DONG-A ILBO