Carbon neutrality, as a long-term goal of the international community, can only be achieved through innovation in climate technologies. The scale of climate finance and clean energy investments has continued to grow, with new markets recently emerging through the convergence of climate technologies with other advanced technologies such as artificial intelligence (AI). In this context, this study focuses on the growth and global expansion of startups, which are key economic players capable of driving innovation in climate technologies. In the study, a climate tech startup is defined as an unlisted company established within the past 10 years that has innovative ideas or business models related to technologies contributing to greenhouse gas reduction or climate change adaptation. Based on this definition, the study examines not only the roles of government support in leading countries but also success stories of promising climate tech startups. It also analyzes the ecosystem for climate tech startups and the effectiveness of R&D support programs in Korea, ultimately deriving policy implications for Korea.

Chapter 2 analyzes the key strategies of major countries and promising climate tech startups. Across all the countries reviewed, governments are increasing financial support, encouraging private investment, and supporting networking hubs to connect climate tech startups with each other and other partner companies. In particular, Germany operates large-scale and long-term funds such as the DeepTech & Climate Fund (DTCF), targeting startups at the growth stage rather than those in the early phase. Japan offers incentives, including tax deductions, to encourage collaboration between startups and large corporations as well as investment from large corporations. On the other hand, the UK and the US, where the climate tech markets are largely driven by the private sector, operate specialized institutions for high-risk, high-reward technologies such as ARIA and ARPA-E. The UK promotes the commercialization of climate technologies through regional clusters and innovation networks, including Catapults and Living Labs. The US supports climate tech startups through initiatives like the Energy Program for Innovation Clusters (EPIC), which funds organizations within regional innovation ecosystems. Finland, where both the public and private sector are actively engaged, encourages startups to expand overseas from the early stages of their establishment.

Promising climate tech startups around the world are growing and expanding their businesses into global markets by leveraging various government support programs, attracting private investment, engaging in technology collaborations and partnerships, and capitalizing on the capabilities of their founders. For example, companies such as TBM and Sila Nanotechnologies have successfully utilized a range of government programs from the R&D stage to commercialization for their growth and international expansion. Climeworks and Ascend Elements have secured some of the largest investments in the industry by demonstrating operational success with facilities applying their own technologies and by leveraging government matching funds. Sunfire, Clean Planet, and Coolbrook have achieved successful demonstration and commercialization through strategic partnerships with corporations, universities, and research institutions. Meanwhile, Carbon Clean and 44.01 have developed distinctive business models driven by the leadership and technical expertise of their founders.

Chapter 3 explores the ecosystem and enabling environment for climate tech startups in Korea, along with an analysis of the effectiveness of government R&D programs. Climate tech startups in Korea account for only approximately 5% in terms of both number and total investment scale as of the 2015-2024 period. Over 70% of the total investment was concentrated in the early stages of investment (Series A and below), and the pace of investment attraction remains relatively slow. Notably, government support has led the growth of startups, while the investment shares of venture capital (VC) firms and corporate venture capital (CVC) entities remain comparatively low. Policies and institutional support for climate tech startups primarily focus on financial assistance and the development of a startup ecosystem. Through financial mechanisms such as the Climate Technology Fund, the government aims to stimulate private investment while strengthening the roles of technology demonstration platforms and regional innovation clusters including Green Convergence Clusters. In addition, programs supporting global expansion, such as an initiative to link the Creative Technology Solution (CTS) and Tech Incubator Program for Startup (TIPS), are recently being implemented.

In order to evaluate the effectiveness of the Korean government’s support for climate technology development, the study analyzed the five-year outcomes of R&D support programs implemented between 2016 and 2018. The analysis focused on major climate technologies, including renewable energy, energy efficiency, and hydrogen and ammonia utilization technologies, selected based on their potential for emission reduction and trends in national R&D investment. An AI-based deep learning classification model was used to identify participants in major climate technology R&D support programs. Propensity Score Matching (PSM) and Difference-in-Differences (DID) methods were then used to estimate the impact. The results indicate that the R&D support programs had a positive effect on the financial performance of both startups and small and medium-sized enterprises (SMEs), with a notably stronger and more sustained impact observed in startups compared to SMEs. However, innovation outcomes showed a temporary increase only among SMEs, whereas social outcomes such as job creation were not statistically significant.

Based on these findings, the study suggests policy directions necessary to effectively support climate tech startups in Korea. These include general strategic directions and stage-specific support strategies tailored to the R&D, demonstration, and growth/scale-up phases. Detailed implications for each are discussed below.

Above all, it is crucial to enhance the understanding of climate technologies while ensuring the continuity and consistency of policy frameworks. Achieving this objective requires adopting a balanced and comprehensive perspective on climate technologies. Moreover, it is important to recognize that the perceptions of firms and investors are likely to shift only when there is a credible assurance regarding the long-term sustainability of government policies. The positive impacts of major climate technology R&D programs identified in this study further underscore the importance of sustained support for climate tech startups.

By stage of technology development, the first priority in the R&D phase is to assess whether technology support adequately addresses the integration of different technologies and market demand, and to strengthen the role of universities. Evaluating whether existing policies sufficiently foster technological innovation through convergent approaches is crucial. From a market demand perspective, a detailed analysis should be conducted to identify which technologies are likely to attract significant investment incentives at specific points in time, and this information should be effectively utilized. In addition, measures to enhance incentives for university-based startup activities and collaborative research with external partners should be considered.

Second, in the demonstration phase, it is important to encourage early-stage startups to pursue global expansion and to support regional networks. Given that the Korean economy has high export dependency and a small climate technology market, overcoming these limitations requires strategies that promote consideration of overseas market entry from the initial stage of idea development, similar to the Finnish model. Furthermore, strengthening the role of regional living labs and facilitating the adoption of technologies validated within the region at relatively low cost should also be prioritized.

Finally, in the growth and scale-up phase, it is necessary to expand investment incentives for climate technologies and to support the strengthening of partnerships between firms. It is recommended that tax incentives for climate technology be introduced or enhanced to encourage participation from a diverse range of private investors. In addition, policy mechanisms should be developed to attract investment from well-capitalized firms and corporate venture capital (CVC) entities. For startups seeking global expansion, efforts to facilitate strategic partnerships with local companies in target markets should be further strengthened.

As strategic competition between the United States and China intensifies, tensions in the Taiwan Strait are escalating. The wars in Ukraine (2022) and between Israel and Palestine (2023) have further heightened global uncertainty. The Council on Foreign Relations (CFR) has designated Taiwan as the most dangerous region since 2021. U.S. military, intelligence leaders, and academic experts have warned of potential military conflict over Taiwan by 2027, and numerous reports assume U.S. intervention in the event of a Chinese invasion. China has conducted four large-scale military exercises around the Taiwan Strait since the visit of U.S. House Speaker Nancy Pelosi during President Tsai Ing-wen’s administration (2016–2023) and following the inauguration of President Lai Ching-te (2024–present). The Trump administration’s second term further underscored China’s expanding influence and its ambitions regarding Taiwan in its Interim National Defense Strategic Guidance (INDSG) released in March 2025. Against this backdrop, the Democratic Progressive Party’s (DPP) strengthened pro-independence stance, increased U.S. legislative and military support, and China’s declaration of possible military unification have collectively exacerbated political and diplomatic instability among the United States, China, and Taiwan. In particular, Taiwan’s geostrategic value—bolstered by its advanced semiconductor technology—is gaining prominence, further intensifying U.S.-China rivalry.

As a result, there is growing focus on whether Trump’s second term will lead to a fourth Taiwan Strait crisis amid tensions between the United States, China, and Taiwan. This is because various issues surrounding Taiwan are expected to have a direct impact on the economic and industrial stability of Taiwan, South Korea, and Japan as these tensions intensify. Therefore, there is an increasing need to analyze the mutually complementary industrial structures between Taiwan and South Korea, China, and Japan, and to measure the potential ripple effects in preparation for a Taiwan crisis.

Against this backdrop, this study comprehensively analyzes the potential impact of a Taiwan crisis on the economies and industries of South Korea, China, and Japan in East Asia, based on a scenario involving Trump’s second term. It aims to examine the triangular relationship between the United States, China, and Taiwan not only from a political perspective but also from an economic standpoint.

Above all, unlike political conflicts, cross-strait relations continue to exhibit a strong structure of economic interdependence. In 2024, Taiwan’s export and import dependence on China (including Hong Kong) stood at 20.3% and 26.6%, respectively, with electrical and electronic machinery accounting for 62.3% of this trade, indicating a high level of supply chain linkage. As of 2020, six of China’s top ten exporting companies were Taiwanese firms, primarily in the information and communications sector. Taiwanese companies also remain a major source of foreign direct investment (FDI) in China, contributing significantly to tax revenue and job creation. Furthermore, measures such as China’s tourism restrictions and the partial suspension of tariff-free trade under the ECFA have not had a significant impact on Taiwan’s macroeconomy.

This duality in cross-strait relations functions in an even more complex way within the triangular dynamics of the United States, China, and Taiwan. The Taiwanese Democratic Progressive Party(DPP) government has strengthened its pursuit of independence by focusing on advanced semiconductor manufacturing and expanding diplomatic and security cooperation with the United States to counter China. In parallel, the United States, aiming to decouple its semiconductor industry from China, has deepened cooperation with Taiwan and encouraged TSMC’s investment in the U.S. through initiatives such as the CHIPS Act.

At the same time, while Taiwan pursues a strategy aligned with the United States in the semiconductor sector, it seeks to maintain strategic balance by managing its economic ties with China. Notably, Taiwan’s semiconductor exports to China (HS code: 8542) in 2024 are approximately six times larger than those to the United States. Although Taiwan’s export dependence on China is gradually declining and its reliance on the U.S. market is increasing, this trend does not indicate a complete decoupling from China, as political tensions in the Taiwan Strait persist. This pattern reflects structural factors, including rising labor costs in China, the substitution of intermediate goods due to China’s industrial upgrading, the erosion of Taiwan’s comparative industrial advantage, and the impact of the U.S. ‘Friend-Shoring’ strategy.

Moreover, under the second Trump administration, U.S. policy toward Taiwan has shifted toward a more pragmatic approach characterized by transactional diplomacy rooted in ‘America First’ (MAGA) principles. Following TSMC’s announcement of a $100 billion investment in the U.S., Washington has adopted measures such as pressuring Taiwan to increase defense spending and imposing higher tariffs, thereby exacerbating security concerns within Taiwan. Consequently, Taiwan may adjust its diplomatic strategy to prioritize practical interests between the United States and China. While the United States has enacted pro-Taiwan legislation and provided military support, ambiguity persists regarding the extent of U.S. military intervention in a Taiwan contingency, particularly in terms of defense spending commitments and the political will to resist Chinese aggression.

Therefore, Taiwan is expected to avoid transferring core semiconductor technology to the United States and focus on strengthening its domestic production capabilities to maintain its strategic position. The United States will likely continue intervening in cross-strait relations due to its need for cooperation with Taiwan, while China will accelerate semiconductor localization and maintain its involvement in cross-strait dynamics. As a result, a semiconductor security balance among the United States, China, and Taiwan may emerge, potentially stabilizing tensions in the Taiwan Strait to a certain extent (Scenario I: Status Quo Among the United States, China, and Taiwan).

Conversely, if Taiwan’s core semiconductor technology is transferred to the United States, Taiwan’s strategic value may decline as the U.S. achieves semiconductor localization, leading to reduced U.S. engagement in cross-strait affairs. Meanwhile, China would likely accelerate localization efforts and continue its intervention. If Taiwan further advances its independence agenda, U.S. support may become more limited, increasing the likelihood of intensified Chinese pressure and Taiwan’s isolation (Scenario II: Taiwan’s Isolation). In such a scenario, South Korea, China, and Japan—countries deeply interconnected with Taiwan through industrial and trade structures—would face inevitable economic and industrial losses. This study analyzes the structural impacts of the Taiwan issue on these economies, with particular attention to ripple effects in the semiconductor sector. It further quantifies production and export multiplier effects using input-output (IO) analysis and assesses competitiveness and vulnerabilities in the semiconductor industry through trade statistics (TSI, RCA, ESI, Interdependence Ratio) and the Analytic Hierarchy Process (AHP).

Through industrial linkage analysis, Scenario I: Status Quo demonstrates that industrial linkages between Taiwan and the three East Asian countries—South Korea, China, and Japan—remain intact, generating positive spillover effects on production and exports. China exhibits strong production linkages with Taiwan, while South Korea shows robust export linkages. Japan maintains a relatively stable trade structure, particularly in intermediate goods and equipment exports. Taiwan continues to play a central role in the East Asian supply chain, especially in electrical and electronic equipment, precision machinery, metal, chemical, and general machinery sectors. This suggests that the region’s industrial cooperation structure is unlikely to be easily disrupted in the short term, even as U.S.-China strategic competition intensifies.

In contrast, Scenario II: Taiwan Isolation reveals that all three countries—South Korea, China, and Japan—would suffer significant economic shocks across industries, particularly in electrical and precision machinery. The analysis indicates total losses of $161.1 billion in production-induced effects and $371.9 billion in export- induced effects. South Korea would incur $13.79 billion and $51.18 billion in losses, respectively, with relatively modest production impacts but high sensitivity in export effects, highlighting significant supply chain dependency risks. China would face losses of $120.19 billion and $232.27 billion, respectively, with substantial impacts across industries, particularly in electrical and electronic sectors. Japan would incur losses of $27.15 billion and $89.45 billion, concentrated in metal and machinery-centric industries, raising concerns about intermediate goods supply stability. Overall, Taiwan’s industrial share and multiplier effects in electrical and electronic equipment and precision machinery are the largest among these economies, underscoring its strategic role in East Asia’s supply chain.

To analyze changes in semiconductor industry competitiveness among Taiwan, South Korea, China, and Japan, this study examined export-import structures and supply chain relationships across eight key semiconductor categories. Taiwan demonstrates high export competitiveness in foundry operations (notably TSMC) focused on system semiconductors, as well as individual devices and diodes. South Korea maintains a strong position in memory semiconductors. China holds significant market shares in silicon wafers, memory semiconductors, and discrete semiconductor components, while Japan excels in semiconductor materials, parts, and equipment, including integrated circuit and discrete components.

If Taiwan’s semiconductor exports were to cease, the impacts would be as follows: South Korea would face bottlenecks in system semiconductors, disrupting production and undermining competitiveness in high-value-added ICT industries such as smartphones, AI semiconductors, and telecommunications equipment. Supply disruptions of intermediate goods, including diodes and transistors, would lead to production delays and higher costs. China would urgently need to secure alternative suppliers for system and memory semiconductors, integrated circuit components, and silicon wafers, with supply gaps in high-performance chips creating critical vulnerabilities in AI and high-performance computing. Japan, heavily dependent on system and memory semiconductor imports, would face production setbacks in automotive and advanced manufacturing due to disruptions in automotive semiconductors and control chips. Additionally, a halt in exports to Taiwan could trigger secondary declines in Japan’s exports of semiconductor materials, components, and equipment.

According to the results of the Analytic Hierarchy Process (AHP) analysis, changes in Taiwan’s semiconductor supply chain are recognized as a complex variable encompassing risks across geopolitical, technological, supply chain, and economic dimensions. In Scenario I: Status Quo, where Taiwan’s semiconductor competitiveness strengthens, South Korea (0.3229) and China (0.2915) are the most affected. South Korea’s vulnerability stems from technological competition pressure with Taiwan and excessive supply dependency, whereas China’s vulnerability is driven by its strategic objective of narrowing the technological gap with Taiwan. Differences in perception among expert groups were identified: South Korean and Japanese experts assessed South Korea’s exposure as greater, while Chinese and Taiwanese experts assessed China’s exposure as greater.

In contrast, under Scenario II: Taiwan Isolation, where disruptions occur in the semiconductor supply chain, the United States (0.2960) is expected to be the most affected, followed by South Korea (0.2595), China (0.2379), and Japan (0.2066). This reflects the United States’ high dependence on TSMC, coupled with its semiconductor self-reliance still being in a transitional phase, such that supply disruptions from Taiwan could rapidly escalate into strategic risks. In this scenario, South Korean and Chinese experts assessed the impact on South Korea as greater, whereas Japanese and Taiwanese experts assessed the impact on the United States as greater. Overall, South Korea demonstrated high sensitivity in both scenarios, indicating that its industrial structure is particularly susceptible to changes in Taiwan’s supply chain and underscoring the urgent need for measures beyond addressing simple trade imbalances to mitigate industrial security risks.

Based on this analysis, the study recommends that South Korea strengthen its supply chain resilience and secure greater strategic autonomy to effectively respond to U.S.-China strategic competition and Taiwan-related risks. This requires investment in R&D across the full value chain, including the internalization of system semiconductor production, advancement of memory semiconductor technologies, and development of next-generation semiconductor technologies. Additionally, it is essential to restructure the semiconductor industry ecosystem as a national strategic sector and establish a virtuous cycle of technology development, talent cultivation, and capital investment.

Moreover, multi-layered response strategies are necessary, including supply chain diversification, localization of core components, and strategic stockpiling of key materials, as well as enhancing global value chain stability through multilateral cooperation with the United States, Japan, and the EU. South Korea must also play a leading role in restoring WTO functions and strengthening the multilateral trade system to help establish a sustainable trade order amid global trade uncertainties. In this context, it is critical to proactively explore mid- to long-term strategies to stabilize supply chains and reinforce industrial security through comprehensive analyses that anticipate structural shocks arising from U.S.-China strategic competition and Taiwan-related risks.

Global security conditions have become more uncertain than ever in recent years. In particular, the energy sector is experiencing rapid structural changes and a swift geopolitical realignment, while multiple factors—including the intensification of strategic competition between the United States and China, the prolonged Russia–Ukraine war, accelerated climate-change responses and energy transitions, and the launch of the second Trump administration in the United States—are intertwining to further deepen the instability of the international political order and the global energy market. Amid such a rapidly changing international environment, energy security is emerging as a core issue that combines national security, diplomatic strategy, and energy geopolitics. Against this backdrop, this study focuses on the strengthening cooperation between the Gulf Cooperation Council (GCC), regarded as a key region for global energy supply, and China, the world’s largest energy importer. China is actively promoting the development of its renewable energy industry and related technologies to mitigate its high dependence on external energy sources and to accelerate the transition toward a low-carbon society. The GCC, leveraging its immense fossil-fuel supply capacity, is simultaneously pursuing industrial diversification and energy transition, and in doing so is expanding its demand for external cooperation in the field of environmentally friendly energy. Accordingly, the two sides are forming a mutually complementary cooperative relationship in the areas of fossil energy and clean energy, rapidly deepening the scope and level of their cooperation.

South Korea also has a high dependence on energy imports, with a significant portion of those imports relying on the GCC. In this context, the expansion of energy cooperation between China and the GCC is highly likely to have direct and indirect impacts on South Korea’s energy security and its overall economy.

Accordingly, this study analyzes the current state of energy cooperation between China and the GCC amid changing energy-security and geopolitical conditions, and seeks to identify the characteristics of cooperation in each sector. Ultimately, it aims to draw policy implications that may serve as a reference for establishing South Korea’s diplomatic relations and energy-cooperation strategies with the GCC.

Before examining the current state of energy cooperation between China and the GCC, Chapter 2 categorizes and outlines changes in the global environment surrounding the two sides into four areas: shifts in U.S. and Chinese influence within the GCC; fragmentation of global supply chains and restructuring of energy supply chains resulting from the Russia–Ukraine war; energy-transition trends driven by climate- change response; and the energy policies of the second Trump administration in the United States. First, recent U.S. and Chinese influence within the GCC has shown contrasting patterns. The United States has long maintained a strategic relationship with the GCC centered on its role as a security provider, but after the 9/11 terrorist attacks and the Iraq War, it came to recognize the costs and limits of involvement in the Middle East. As a result, a trend has continued in which it gradually reduces its engagement and reallocates diplomatic and security resources to Asia and other regions. Above all, the rise in U.S. energy self-sufficiency brought about by shale-oil development has accelerated the reduction of U.S. involvement in the Middle East. In contrast, China has been steadily expanding its strategic presence in the GCC by strengthening cooperation in trade, infrastructure development, and advanced technologies, based on economic growth, rising energy demand, and the Belt and Road Initiative. Meanwhile, Russia’s invasion of Ukraine in 2022 has made the trend of supply-chain fragmentation particularly evident in the energy sector. Europe rapidly reduced imports of Russian crude oil and natural gas and strengthened its energy linkages with the United States and other allies. China’s expansion of energy imports from Russia, followed by increased imports from the GCC, is also aligned with this supply-chain restructuring trend. At the same time, the international community is pursuing a structural transformation of energy systems and the expansion of renewable energy to address the climate crisis and achieve carbon-neutrality goals. As of now, during this transitional phase of energy transformation, fossil fuels and clean energy sources coexist, and available energy sources such as LNG and nuclear power are being utilized as transitional energy resources. Nonetheless, as of 2024, fossil fuels still account for more than 80% of primary energy consumption. Accordingly, in the short term, competition to secure oil and natural gas is expected to unfold alongside the continued dual challenge of meeting carbon-reduction targets. Finally, since taking office, the second Trump administration has been swiftly pushing policy changes in the fields of energy and climate. In particular, the dismantling of the previous Biden administration’s clean-energy and carbon- neutrality policies has heightened uncertainty and change in the renewable-energy sector and in climate-change response. This has led to concerns about delays in U.S. carbon-neutrality efforts and a weakening of U.S. climate leadership within the international community. In addition, the second Trump administration is strengthening foreign sanctions, including in the energy sector, and these sanctions are exerting direct and indirect impacts on energy-cooperation relations between China and the GCC.

In Chapter 3, the study examines areas of mutual cooperation demand by outlining the energy-policy directions of China and the GCC. China has long regarded energy security as a core national-security task, as its external dependence on crude oil and natural gas has grown steadily. With its high dependence on external energy sources, China requires not only stable energy procurement but also strategic cooperation partners in the field of clean energy. In this context, cooperation with the Middle East—especially with the GCC countries—is essential for both strengthening China’s energy security and advancing its clean-energy transition. China’s energy cooperation with the GCC extends from ensuring stable supplies of traditional energy sources such as crude oil and natural gas to strategic-level cooperation needs encompassing joint development of renewable energy, hydrogen, nuclear power, and advanced energy technologies, as well as efforts to promote yuan-based settlement in energy trade. In addition, China seeks to build a mutually beneficial energy partnership by linking the Belt and Road Initiative with the development strategies of GCC countries. In short, the GCC, with its abundant energy resources and potential for renewable-energy development, is an indispensable cooperation partner for China’s energy security and energy transition, while also serving as a region that plays an important role in expanding China’s influence in the Middle East amid U.S.–China strategic competition. Meanwhile, the GCC is strategically expanding cooperation with China to secure stable energy export markets and strengthen capabilities for developing next-generation energy sources. As the world’s largest energy importer and a technological powerhouse with geographical proximity and strong infrastructure investment capacity, China is viewed by the GCC as an ideal partner.

In Chapter 4, based on the analyses in Chapters 2 and 3, the study describes the current status and characteristics of energy cooperation being pursued by China and the GCC, categorizing it into fossil fuels, petrochemicals, renewable energy, hydrogen, and nuclear power. First, an examination of China’s crude oil and LNG import trends over the past five years shows that it has maintained solid supply relationships with Saudi Arabia (crude oil) and Qatar (LNG). In the case of crude oil, China procures 30–40% of its total imports from the GCC, and while Russia and Saudi Arabia have alternated as China’s largest suppliers, imports from Russia increased after the onset of the Russia–Ukraine war in 2022 due to price competitiveness and geopolitical factors, but began to decline in the first quarter of 2025. By contrast, amid U.S.–China tensions and the suspension of U.S. crude oil imports, imports from Saudi Arabia saw a slight increase in the first quarter of 2025. China’s crude oil import volumes and supply sources have been changing in connection with various geopolitical variables. The volumes imported from major supplying countries have shown fluctuations over time due to multiple factors, including U.S. sanctions on major oil-producing countries, the Russia–Ukraine war, and U.S.–China trade tensions. In the case of LNG, China is pursuing a stable procurement strategy through long-term purchase agreements with Qatar and participation in investments in the North Field expansion project, and the LNG supply relationship between the two countries is expected to continue over the long term. Moreover, the expansion of LNG cooperation between China and the UAE is also noteworthy in terms of diversification of import sources and strengthening energy security. In this way, energy trade between China and the GCC shows a pattern in which mutual interdependence and strategic cooperation are becoming further reinforced as part of managing geopolitical risks and ensuring energy security.

China and the GCC are also pursuing industrial diversification and energy transition by forming mutually complementary cooperation structures in the petrochemicals, renewable energy, hydrogen, and nuclear-power sectors. In the petrochemical sector, large-scale cooperation projects are being promoted in both China and GCC countries. China, in response to slowing oil demand resulting from the expansion of new-energy vehicle adoption and the downturn in the real-estate market, is reducing the production of refined petroleum products and expanding the production of high-quality chemical products. The GCC, for its part, seeks industrial diversification through the development of the petrochemical industry. GCC countries display a tendency to use renewable energy to generate domestic electricity while exporting crude oil and LNG to maximize overseas sales profits. Although GCC countries have strong ambitions to achieve carbon- neutrality goals and expand renewable-energy development, the renewable-energy industry within the GCC remains in an early stage, making infrastructure development particularly important. From the perspective of GCC countries, strategic cooperation with China—which leads the global renewable-energy supply chain—is highly important. The GCC’s installation capacity in the area of renewable energy is rapidly expanding, with demand for solar power sharply rising. China currently dominates the global photovoltaic manufacturing supply chain, and is actively targeting the GCC as a strategic market amid U.S. and European import restrictions and pressures stemming from oversupply. Cases of solar-power projects in GCC countries involving Chinese participation show that China is pursuing the establishment of local solar-product manufacturing bases and the export of solar products. In the renewable- energy development goals of the GCC, wind power is also recognized as a key generation source, with wind-power capacity expanding mainly in Saudi Arabia, the UAE, and Oman. As one of the world’s largest exporters of wind-power equipment, China is cooperating with major GCC countries in various forms. Chinese companies not only supply key equipment but also undertake EPC roles in wind-power projects and, through the establishment of joint ventures, promote the manufacturing and assembly of key components locally within the GCC.

Cooperation between China and the GCC in the hydrogen sector can be understood as focusing primarily on green-hydrogen cooperation linked to renewable energy. GCC countries, with their abundant renewable-energy resources, and China, with its large-scale production facilities, technological capabilities, and research capacity, form a mutually complementary cooperation structure. Based on its large-scale facilities, technological strength, and research capability, China is pursuing various cooperative projects in hydrogen and related industries with GCC countries such as Oman. In the nuclear-power sector, China regards Saudi Arabia and the UAE as key partners and is pursuing cooperation on intergovernmental agreements, reactor operation, fuel supply, personnel training, uranium and thorium exploration, as well as nuclear safety and public security. In 2025, China and the GCC held the “First China–GCC Forum on the Peaceful Use of Nuclear Technology,” during which they discussed next- generation nuclear technologies such as SMRs, workforce development, technical exchange, and potential joint projects. Meanwhile, China and the GCC are strengthening their strategic partnership by achieving their mutually complementary goals of energy security and industrial diversification through the Belt and Road Initiative. China views the GCC as a key cooperation partner in the Belt and Road Initiative and has pursued cooperation in energy trade and energy-infrastructure development. Each GCC country is also seeking economic diversification and energy transition by linking its national development strategy with the Belt and Road Initiative. China emphasizes Belt and Road cooperation with countries around the world, but the GCC is regarded as a particularly important partner in terms of building a strategic partnership to respond to U.S.–China strategic competition, strengthening China’s influence in the Middle East, and consolidating energy cooperation.

Lastly, Chapter 5 evaluates and forecasts energy cooperation between China and the GCC and presents implications for South Korea. Amid multiple external factors—such as recent changes in the global geopolitical environment, transformations in energy structures, the Russia–Ukraine war, and U.S. sanctions in the energy sector—energy cooperation between China and the GCC has developed into a mutually complementary relationship. Based on the analysis in the main text, the evaluation and outlook for China–GCC energy cooperation can be summarized as follows. First, from China’s perspective as the world’s largest energy importer and a country that prioritizes energy security above all, the GCC is a strategic partner possessing not only abundant crude oil and natural gas resources but also significant potential in renewable energy sectors. Second, amid uncertainty in the global energy supply chain following the outbreak of the Russia–Ukraine war, mutual interdependence between China and the GCC has deepened. From the perspective of securing stable export and import markets for crude oil and LNG, the strategic interests of China and the GCC align. Accordingly, the two sides have built a mutually stable energy-supply relationship amid geopolitical risks and volatility in the global energy market. During the transitional phase of energy transformation, the fossil-fuel supply relationship between China and the GCC is expected to continue for the time being. China has been reducing its imports of U.S. energy due to factors such as the tariff war with the United States, and the GCC’s energy exports to China are expected to further expand as a result. Third, cooperation between the GCC and China in the clean-energy sector has deepened as the GCC seeks industrial diversification alongside efforts to transform its current energy structure. Chinese solar and wind companies are actively participating in local power-plant construction, equipment supply, technological cooperation, and ecosystem development within the GCC. Meanwhile, due to U.S. sanctions targeting China’s renewable- energy sector, China’s demand for cooperation with the GCC is expected to grow further from the perspective of market and production-base diversification. Fourth, while U.S. influence within the GCC is declining, China has been strengthening comprehensive cooperation with the GCC. As long as China’s demand for fossil-fuel imports and the GCC’s demand for development in the clean-energy sector continue, cooperation between the two sides is highly likely to deepen. However, the GCC faces the need to pursue balanced diplomacy between the United States and China due to issue-specific interests and strategic considerations, such as foreign-policy and security concerns and the pursuit of economic pragmatism. Taken together, energy cooperation between China and the GCC is expected to continue for the time being in line with their strategic needs, but the pace of cooperation may vary by energy sector depending on external variables such as the degree of U.S. engagement in the Middle East under the second Trump administration, the pattern of U.S.–China strategic competition surrounding the GCC, the Russia–Ukraine war, and the political situation in the Middle East. Recently, the GCC has shown a tendency to strengthen cooperation with the United States to foster its AI industry, and the United States is requesting the exclusion of China in AI cooperation. From the perspective of the GCC, which seeks to promote convergence between the AI and energy sectors, it will be necessary to observe the extent to which it will continue energy cooperation with China in the future. It is also noteworthy that GCC countries, which have so far relied primarily on Chinese renewable- energy products and technologies, are making efforts to localize renewable-energy component manufacturing to reduce dependence on a single supply source.

South Korea relies on the GCC for a significant share of its crude-oil imports and ensures supply stability through measures such as joint crude-oil stockpiling projects. In addition, by expanding cooperation with the GCC across the energy sector—including refining and petrochemicals, clean energy, hydrogen, and nuclear power—South Korea is enhancing its energy security and industrial competitiveness while also contributing to the attraction of foreign investment. Accordingly, the GCC is a highly important strategic partner for South Korea. Based on the current status and characteristics of China–GCC energy cooperation analyzed in the main text, this study presents the following implications for South Korea. First, the Korean government needs to build a relationship of trust with GCC countries from a longer-term perspective and establish cooperation platforms for this purpose. Second, it is necessary to pay attention to the possibility that the GCC may pursue strategies to reduce its dependence on China- centered renewable-energy supply chains and diversify its cooperation partners. From this perspective, South Korea can explore opportunities for cooperation with the GCC. Third, in the refining and petrochemical sectors, South Korea should concretely explore cooperation strategies and ways to establish long-term partnerships that differentiate it from China in areas where it is currently cooperating with the GCC. Strengthened strategic cooperation between China and the GCC through joint projects underway in both China and GCC countries may increase risks for South Korea’s petrochemical industry, which is currently experiencing difficulties. To respond to the complex risk factors that China–GCC cooperation may pose to South Korea’s domestic industry, it is essential to monitor cooperation trends between the two sides while actively formulating measures to enhance South Korea’s competitiveness. Fourth, in the solar-power sector, South Korea may consider: ① entering the U.S. market more actively, where Chinese products are excluded; ② supporting Korean firms’ entry into the GCC in the premium-product segment of the small-scale solar-power market; and ③ pursuing cooperation in which Korean companies participate as project developers in GCC solar-power projects while considering Chinese companies as joint developers or selecting Chinese firms as EPC contractors. Fifth, based on the UAE’s achievement of being the first GCC country to commercialize nuclear-power generation through cooperation with Korea Electric Power Corporation (KEPCO), South Korea should actively enter new nuclear-power markets in the GCC, such as Saudi Arabia. Although China is expanding its cooperation base in the nuclear-power sector by strengthening its strategic partnership with the GCC, South Korea has comparatively strong competitiveness in terms of winning and completing nuclear-power projects. Chinese firms are also expected to bid on Saudi Arabia’s nuclear-power project, and South Korea needs to observe China’s nuclear-cooperation trends with the GCC from various angles. In addition, as major GCC countries are paying close attention to the SMR sector, South Korea should further expand its cooperation base related to SMRs in the GCC nuclear-power market.

Since Russia’s invasion of Ukraine, the foreign policy orientation of Northern European countries, including Sweden and Finland, as well as the three Baltic States—Estonia, Latvia, and Lithuania—has undergone significant changes. Sweden and Finland, which had historically maintained a position of neutrality, joined NATO in 2023 and 2024, respectively. These developments, along with broader regional concerns regarding geopolitical instability and security, have contributed to the adoption of policies aimed at reducing political and economic dependence on Russia.

The Baltic States, in particular, are actively diversifying their external cooperation channels across key sectors such as energy, trade, and investment. This trend aligns with the European Union’s REPowerEU strategy, which since 2022 has encouraged member states to reduce reliance on Russian fossil fuels—especially pipeline natural gas—through the expansion of liquefied natural gas (LNG) imports and the development of alternative energy sources. In addition to the energy sector, cooperation with Russia has declined across a wide range of industries, including electronics, machinery, agriculture, food, logistics, and maritime shipping. Concurrently, economic and strategic partnerships with the EU and the United States are being actively expanded.

The defense and security sectors are also experiencing structural change. With Sweden and Finland’s accession to NATO and increased security needs among the Baltic countries, cooperation in defense production, procurement, and exports is expanding. South Korea has already enhanced its defense industry presence in Central and Eastern Europe, most notably in Poland, and similar opportunities are emerging in Northern Europe and the Baltic region. These countries are also positioning themselves as key participants in Ukraine’s reconstruction process, with high-level policy discussions—including international conferences—actively ongoing.

In response to this shifting, the South Korean government is broadening its engagement through various initiatives, including increased grant assistance for Ukraine’s recovery, the strategic use of the Economic Development Cooperation Fund (EDCF), and the reinforcement of institutional and local cooperation networks. The Baltic States, having undergone their own transitions from former Soviet republics to EU member states, provide valuable reference points for Ukraine’s post-war reconstruction and potential EU accession. This creates opportunities for enhanced Korea–Baltic cooperation in sectors such as defense, energy, digital technology, and logistics.

Recent shifts in Northern Europe and Baltic States policies toward Russia reflect a broader realignment in international partnerships. While each country varies in its approach—ranging from assertive responses by Finland and Lithuania to more moderate adjustments in Estonia and Latvia—public attitudes toward Russia have become increasingly critical since Russia’s invasion of Ukraine, and this has been reflected in concrete policy decisions in both the political and economic domains.

These policy shifts are not short-term reactions, but rather are evolving into long-term strategies for external cooperation. Nevertheless, the full replacement of previously existing cooperation networks remains an ongoing challenge, underscoring the need for new, stable partnerships. In this context, Europe—with its high purchasing power and policy alignment with democratic economies—offers considerable potential for Korean companies seeking to expand their presence.

This study examines the evolution of anti-Russia policies in Northern Europe and the Baltic States, analyzes changes in the regional demand for international economic cooperation, and identifies strategic implications for South Korea. In addition to a literature review, the study incorporates qualitative insights obtained through field research, expert consultations, and engagement with the Embassy of the Republic of Latvia to the Republic of Korea. Particular attention is given to the defense and infrastructure sectors, where future cooperation models may be developed. With the support of the Embassy of the Republic of Latvia to the Republic of Korea and the Investment and Development Agency of Latvia (LIAA), fieldwork was conducted in Riga from April 21 to 25, 2025, during which the research team carried out policy interviews and expert discussions to examine the trajectory of anti-Russia strategies in the Baltic States and explore the potential for expanding Korea–Baltic cooperation, including opportunities for Korean defense industries in local markets.

Based on this analysis, the study presents the following four policy recommendations: 1) Expand South Korea’s EU cooperation framework to include Northern Europe and the Baltic region; 2) Identify strategic industries aligned with regional characteristics and development priorities; 3) Pursue integrated projects that address cross-national needs across the five countries; and 4) Develop mechanisms for joint participation in large-scale European initiatives through strengthened bilateral and multilateral partnerships.

Korea and Japan normalized diplomatic relations with the signing of the Treaty on Basic Relations on June 22, 1965. In 2025, the two nations mark the 60th anniversary of this normalization. Over the decades, both countries have developed their relationship through active exchanges and cooperation in politics, economics, society, and culture, underpinned by the shared values of liberal democracy and a market economy. However, historical disputes—such as the issues of wartime “comfort women” and forced labor, visits by Japanese officials to the Yasukuni Shrine, and territorial disputes over Dokdo (Takeshima in Japan)—remain unresolved. These tensions continue to negatively affect broader cooperation.

Against this backdrop, this study focuses on envisioning a future- oriented relationship. This concept emphasizes overcoming historical entanglements that hinder progress on cooperative agendas. By considering changing circumstances surrounding bilateral ties, it presents a long-term vision for Korea–Japan relations looking toward 2050, based on comprehensive analysis across various fields.

1. Diplomacy and Security: Future Vision 2050

Korea and Japan must establish themselves as responsible partners in defending democracy and a rules-based order, while jointly shaping a regional multilateral security architecture. In the context of U.S.–China strategic competition, both countries should take on proactive roles as designers of world order working to prevent war. Key measures include: Building early warning systems, Enhancing operational information- sharing technologies, Expanding public diplomacy for mutual understanding, and Strengthening trilateral Korea–U.S.–Japan cooperation to ensure sustained constructive U.S. engagement.

Looking ahead, if conditions emerge for North Korea to rejoin the international community and pursue economic development, Korea must already have a clear mid- to long-term strategy of proactive engagement. Japan’s role would be critical in this process. Coordinated engagement by Seoul and Tokyo would benefit both countries, requiring the establishment of a cooperative framework. Proposals include creating a Northeast Asia Development Bank to support North Korea’s reform, opening, and infrastructure development, serving as an institutional framework to manage the involvement of multiple state actors.

On energy and climate issues, Korea and Japan should deepen cooperation to strengthen energy security and respond to the climate crisis. This includes joint LNG procurement and stockpiling systems, collaboration on Alaska LNG projects, and nuclear cooperation such as securing enriched uranium supplies. Strategies proposed are: Establishing a high-level intergovernmental dialogue, Creating joint investment and information-sharing platforms among private companies, Expanding next-generation talent exchanges, and Linking bilateral cooperation with regional/global initiatives such as ASEAN+3 and APEC.

2. Advanced Technology and Economic Cooperation

The study identifies humanoid robotics as a promising area for Korea–Japan collaboration, based on comparative analysis of long-term national strategies and mission-oriented R&D programs. A three-stage roadmap toward 2050 is proposed, covering both technological and market/ application cooperation. Such collaboration could not only solve social challenges and enhance global competitiveness but also serve as an innovative model spreading across Asia.

In the economic field, supply chain cooperation is a top priority. Both nations face vulnerabilities due to high external dependence on energy, food, and minerals. With similar levels of economic development and shared values, Seoul and Tokyo should institutionalize economic security and industrial cooperation, eventually pursuing binding trade agreements.

Financial cooperation is another priority. The two countries should extend or renegotiate the bilateral currency swap agreement, set to expire in March 2026, and expand its scale. A yen–won swap mechanism could also be used for trade settlements, broadening its utility.

The study highlights green economy cooperation, focusing on hydrogen and ammonia. By sharing a vision for carbon neutrality by 2050, the two governments can lay the groundwork for long-term cooperation. The situation calls for “practical” agendas to address shared challenges in realizing a hydrogen society.

In the blue (marine) economy, opportunities for cooperation include: Joint development of seabed resources (oil, gas, rare earths) and offshore wind expansion; Technology collaboration on smart ports, autonomous vessels, and maritime communication; and Building interoperable port automation systems and smart port networks.

The upcoming termination of the Korea–Japan Continental Shelf Agreement demands a long-term vision. Considering China’s persistent claims and global climate change, Seoul and Tokyo could explore turning this area into a trilateral (Korea–Japan–China) cooperation zone, or even a “Korea–Japan–China+U.S.” arrangement, in light of the U.S.–China strategic competition. Korea should take the initiative to make the Joint Development Zone (JDZ) a space for cooperation, not competition.

Finally, the study stresses the role of minilateral cooperation within platforms such as the RCEP and IPEF. Such arrangements can generate tangible outcomes despite limitations in bilateral institutionalization. Korea and Japan should use existing agreements strategically, strengthen RCEP-based Korea–Japan–ASEAN cooperation, and lead digital transformation initiatives. Proposals include: Leading discussions on rules of origin and carbon reduction in RCEP, Launching joint digital pilot projects, and Supporting ASEAN digital capacity-building.

3. Social Dimension and People-to-People Ties

Both Korea and Japan face demographic crises of ultra-low fertility, aging, and population decline, leading to regional extinction—i.e., the disappearance of local communities. Policies for 2050 must focus less on raising birth rates and more on structural adaptation. Cooperation could include policy exchanges, youth and startup collaboration, digital regional revitalization, and cultural-tourism projects.

The study emphasizes the central role of youth in shaping future relations. Exchanges through culture, travel, and social media have brought younger generations closer than ever. However, asymmetries exist: in 2024, two-thirds of bilateral visitors were Korean, and Korean participation in student and youth exchange programs far exceeded Japanese. Reducing this imbalance is key to fostering mutual understanding.

The role of the media is also crucial. Korean and Japanese media should move beyond sensationalism in reporting on historical and territorial disputes, providing balanced, context-rich coverage. To this end, proposals include creating a Korea–Japan Media Monitoring Committee and launching a joint “Future Journalism” program at leading universities of both countries.

For cultural industries, three proposals are made: Government cooperation to expand exports of cultural content, Joint measures against illegal overseas distribution, and Support for Korean startups entering the Japanese market.

4. Conclusion: Entering a New Era The year 2025 represents both reflection on the past 60 years and exploration of the next 60—effectively marking the first year of a new Korea–Japan era. Yet both countries face unstable political leadership and external pressures from “Trump 2.0,” with heightened tariff and alliance burden-sharing demands limiting space for long-term vision.

Nevertheless, bottom-up dynamics are favorable: public perceptions are more positive than ever, and the two economies are deeply intertwined. Both nations share a vital interest in defending openness and free trade amid global protectionism.

Therefore, the future vision must move beyond bilateral reconciliation, instead focusing on cooperative agendas that ensure the well-being, prosperity, and welfare of future generations. Despite domestic political risks and external challenges in 2025, the responsibility of the current generation to contribute to this vision is more urgent than ever.

Executive Summary

1. Introduction

2. The Model

3. Theoretical Results

4. Empirical Analysis

5. Conclusion

References

This paper examines how culture influences the success of fertility-control policies. In the 1970s, many developing countries implemented birth-control measures grounded in the quality-quantity trade-off, yet their outcomes diverged, e.g., Taiwan, Thailand, and South Korea achieved rapid fertility declines, while Pakistan, India, and Brazil did not. We propose that societal conformity—the degree to which individuals adhere to norms such as a government-endorsed ideal family size— determines how effectively policy incentives translate into behavior. Using a unified theoretical framework, we show that higher conformity amplifies the impact of birth-control policies on both reducing fertility and increasing investment in children’s education. Under empirically plausible conditions, this strengthened quality-quantity trade-off not only boosts short-run economic growth but also accelerates the shift from agriculture to manufacturing—measured by manufacturing’s employment share—even when manufacturing is more capital-intensive and benefits from human-capital-driven, labor-saving technologies. Finally, we validate these predictions with cross-country empirical evidence, underscoring the pivotal role of culture in shaping demographic change and economic development.

Together with the global expansion of projects to realize carbon neutrality, demand for key minerals—used as raw materials for renewable energy power generation such as solar panels and wind turbines, as well as for electric vehicles (batteries)—is rapidly increasing. One major concern is that China holds a dominant position across all stages of the global critical minerals supply chain, from mining (ore and concentrate) to refining and smelting (basic and processed metals), and recycling (scrap). In particular, China’s influence in the refining and smelting sector is overwhelming, and the nation also exerts significant control over the mining stage for certain minerals. In response, major countries including the United States, the EU, Japan, and the Korean government are strategically working to establish stable supply chains in this area, aiming to reduce reliance on China (de-Chinaization) and to transition energy structures towards decarbonization. Notably, although Korea is a major manufacturer in advanced industries such as electric vehicle batteries and semiconductors, its dependence on China for refined and processed products of critical minerals like lithium, cobalt, and nickel exceeds 70%, posing significant vulnerabilities in its supply chain.

China holds a dominant position as both a major supplier and consumer within the global critical minerals supply chain, but it exhibits various strengths and weaknesses at different stages. This study divides the supply chain into the stages of mining (ore and concentrate), refining and smelting (basic and processed metals), and recycling (scrap) to analyze China’s influence and vulnerabilities. It also examines strategies on the part of the Chinese government and enterprises to fortify their supply chains, drawing implications for Korea’s stable mineral procurement.

Chapter 2 of the study analyzes China’s control measures and vulnerabilities in the global critical minerals supply chain. While China firmly dominates the refining and smelting stages of the global critical minerals supply chain, it is relatively vulnerable in the mining stage. This is because, despite holding some advantages in ore deposits and production, China’s domestic industrial demand is not fully met, resulting in a high dependence on imported raw materials. Moreover, China has an industrial structure that imports basic raw materials for refining and smelting, meaning that as metal production increases, the demand for raw material imports also rises accordingly. Additionally, our analysis comprehensively considers mineral-specific (basic raw material) reserves, production volume, external dependence, and the Trade Specialization Index (TSI) to evaluate China’s strengths and weaknesses, linking these to the strategies China pursues. China mainly enforces export controls on Group 1 minerals—such as rare earth elements, gallium, and germanium—over which it holds an absolute advantage, using these controls as tools for economic pressure or strategic leverage. For instance, in response to US semiconductor equipment export controls against China, China banned exports of gallium and germanium to the US. For Group 2 minerals (those with advantages in reserves and production but insufficient to fully meet domestic demand), export control systems are also applied, but the focus here is more on domestic supply and demand management. For example, China has tightened export controls on antimony since 2019 to stabilize domestic supply amid internal shortages and growing demand for home appliances in 2024. Meanwhile, minerals classified as Group 3 (disadvantaged minerals) such as copper, aluminum (bauxite), lithium, cobalt, and nickel show high Chinese market shares at the refining stage but suffer from insufficient domestic reserves and production, leading to heavy reliance on overseas sources for raw materials. Copper and aluminum are widely used as base minerals, while lithium, cobalt, and nickel are essential for core industries like secondary battery cathode materials. Any disruption in the supply of these raw materials could impact China’s overall industrial sector. In response, China focuses on domestic resource development, securing overseas mines, and recycling to strengthen resource security and supply chain resilience.

Chapter 3 analyzes domestic mineral resource development and recycling strategies. In the area of domestic development, China strategically manages its mineral resources based on the Mineral Resources Law and the five-year National Mineral Resources Plan. In 2024, a comprehensive revision of the Mineral Resources Law was made to explicitly link resource security with national security, strengthening the legal foundation by introducing provisions for the stable acquisition of strategic minerals and supply chain stability. The National Mineral Resources Plan includes comprehensive strategies not only for domestic resource development but also for securing overseas resources, controlling protective minerals, and stockpiling. The plan (2016–2020) officially designated 24 strategic minerals. In particular, regarding domestic mineral resource exploration and development, various policies are in motion to promote exploration, innovate technologies, and foster mining industry clusters linked with related downstream industries. As of 2023, China’s investment in geological exploration and fixed assets in mining has increased for three consecutive years. Exploration investment has been focused on base minerals, but following policies to expand exploration of strategic minerals, new deposits of lithium, rare earths, and others have recently been discovered. Consequently, China’s global lithium reserves ranking rose from 6th to 2nd in the world. Additionally, China is expanding its influence in deep-sea resource development by securing exploration rights for gas hydrates in the South China Sea and polymetallic nodules in the international deep-sea CCZ (Clarion-Clipperton Zone) area.

In the area of resource circularity, China is actively promoting recycling policies to realize a circular economy and ensure the stable supply of critical minerals. The government plans to establish waste recycling systems (collection and sorting → pre-treatment → refining and recycling) in key sectors such as waste home appliances and spent batteries by 2025, and aims to standardize these systems by 2030. This nationwide system construction and standardization is led by the China Resources Recycling Group (CRRG). The CRRG provides comprehensive solutions by integrating functions such as acquiring and merging leading industry companies, waste collection, processing, distribution, and standard setting. As of April 2025, the CRRG has established nine subsidiaries focused on areas like spent battery recycling and non-ferrous metal recovery, integrating and standardizing the previously fragmented systems across these fields. In the recycling sector, spent electric vehicle batteries have emerged as a crucial means of securing key minerals such as lithium, nickel, and cobalt. Although China has not yet fully built institutional frameworks and standardized markets for spent battery recycling, it has adopted advanced policies faster than any other country and continuously optimizes its regulations through trial and error. Major companies like CATL have already established a closed-loop recycling system and are expanding their influence across the entire supply chain through cooperation with domestic and international automakers. Accordingly, by 2050, China is projected to maintain unparalleled dominance based on the world’s largest spent battery processing capacity, raw material supply, and technological capabilities.

Chapter 4 addresses China’s strategies for securing mineral resources overseas. The Chinese government identified the overseas acquisition of mineral resources as a key policy direction in the National Mineral Resources Plan (2016-2020). It pledged to mobilize various policy tools, including mining cooperation based on the Belt and Road Initiative (BRI), exploring joint investment models linking mining and infrastructure, establishing multilateral and bilateral cooperation platforms, supporting Chinese companies’ overseas mineral investments, and participating in global mining governance. Looking at global mineral (metal resource) investment trends since China officially launched the BRI in 2013, several points stand out. First, investment by private enterprises in metal resources has expanded significantly. Second, the primary investment regions have diversified from a previous focus on Australia to include Sub-Saharan Africa, South America, and East Asia. And third, while investments have continued to focus on base minerals, there has been a gradual increase in investments targeting critical metals such as lithium, nickel, cobalt, uranium, and niobium. Based on comprehensive support from the Chinese government, both state-owned and private enterprises have focused on securing base minerals (iron, copper, aluminum) and critical metals (lithium, nickel, cobalt, uranium, niobium) primarily in Sub-Saharan Africa, South America, and East Asia—key regions for China’s mineral supply. All the major minerals secured overseas by China belong to its group of disadvantaged minerals (i.e., those in which China is relatively weaker domestically). While every country secures its disadvantaged minerals through key supplying nations, China is particularly threatening because it invests aggressively enough to gain control over production within supplying countries. For example, in the Democratic Republic of Congo—where about 70% of the world’s cobalt ore production (with over 50% of global reserves) is concentrated—Chinese companies currently account for over 40% of cobalt ore production. Similarly, in Indonesia, which holds 42.3% of nickel ore reserves, 50% of mining production, and 42% of refining production, Chinese companies are estimated to control about 75% of nickel refining capacity. In other words, China has not only strengthened the raw material stages (ore mining and refining) of critical minerals such as cobalt and nickel—previously its weak links—but has substantially overcome these vulnerabilities. Examining the strategies behind these achievements, first, China has built multi-layered cooperation platforms (region-state, state-to-state) with key mineral-supplying countries in Sub-Saharan Africa, South America, and East Asia, creating long-term negotiation mechanisms with local governments and conducting regular consultations. Second, China established regional funds to provide large-scale financial support (indirect financing) for domestic state-owned and private companies investing locally. Third, it has developed mineral production and processing facilities within key countries to strengthen localization capabilities.

Chapter 5 analyzes China’s export control strategies. China established its legislative plan for the Export Control Law in 2016 and began its enforcement on December 1, 2020. Subsequently, in 2024, China enacted the Regulations on the Export Control of Dual-Use Items and announced the List of Export and Import Administration for Dual-Use Items and Technologies, thereby strengthening its export control legal framework. We evaluate this as indicating China has established a complete legal foundation before the inauguration of the new US administration (Trump’s second term). Since the enforcement of the Export Control Law, China designated key mineral resources as dual-use items to reinforce resource security and, from 2023 onward, has actively used export controls on advantageous mineral resources as a strategic response card. In retaliation to US semiconductor equipment export controls, China restricted exports of major minerals such as gallium and germanium. On December 3, 2024, China implemented export bans specifically targeting the US on dual-use minerals including gallium, germanium, and antimony for the first time. Between 2023 and 2024, China implemented export controls citing the need to protect national security and interests. Some minerals, such as graphite and antimony, were controlled to address internal supply issues and to adjust the list of temporarily controlled items. However, after the inauguration of Trump’s second term in 2025, China escalated the weaponization of mineral resources more explicitly, enacting export control measures immediately upon announcement and clearly signaling these as pressure tactics against the US. For example, the export controls on seven types of Chinese rare earths directly pressured the US defense industry, a move publicly emphasized by Chinese media. Minerals designated as dual-use export control items by China generally correspond to strategic minerals in which China holds a reserve and production advantage, and many have already been designated or are expected to be listed. Coming into 2025, we see a tendency to convert minerals previously on the export licensing management list (e.g., titanium, molybdenum) into dual-use controlled items, or to expand the range of controlled items among existing controlled minerals (e.g., tungsten, rare earths). Controls have also been strengthened on minerals included in the dual-use control lists of other countries, such as indium, molybdenum, and bismuth. Going forward, additional minerals such as vanadium, fluorite (rare earth elements not yet controlled), magnesium (with an expanded control list), beryllium, and aluminum are highly likely to be added to the control list. Regarding the export trends of minerals designated as dual-use export control items between 2023 and 2024, such as graphite and antimony, China has sharply reduced exports of basic raw materials (ore and concentrate) while increasing exports of refined metals and processed metals with higher added value. This strategy is evaluated as an effort to maximize national benefits by shrinking exports of raw materials—whose end users and purposes are difficult to track due to multiple processing stages—and expanding exports of higher value-added finished products.

Chapter 6 proposes the following response measures for the Korean government and companies based on the aforementioned analysis: Since Korea lacks deep-sea mining technology and experience, cooperation with technologically advanced countries such as the United States is necessary. Korea should also actively participate in establishing rational mining regulations that consider environmental protection to secure deep-sea resources. Korea needs to secure competitiveness in the battery recycling industry through a private-sector-led ecosystem construction complemented by institutional support from the government. Cooperation with Chinese companies in refining and smelting within major mineral supplying countries is essential. Regarding minerals such as fluorite and magnesium, which China is likely to attempt to control exports of in the future, the Korean government and companies need to proactively prepare by adjusting stockpiles and diversifying import sources. As China is expected to expand export controls not only on minerals themselves but also on refining and smelting technologies, it is urgent to promote cooperation with countries that have similar demands in refining and smelting sectors.

Empowering women and achieving gender equality are not just moral imperatives-they are global development goals. As one of the United Nations’ Sustainable Development Goals (SDG 5), the issue of gender equality has long been a key priority on ASEAN’s agenda. Since the 1988 Declaration on the Advancement of Women, and more recently through the 2022 Declaration on Promoting Women Entrepreneurship and the ASEAN Community Vision 2025, ASEAN has reaffirmed its commitment to women’s empowerment. Despite the growth in female labor force participation, women remain underrepresented in leadership roles in both business and politics across the region.

Interestingly, ASEAN has a relatively high share of female-led firms compared to other regions-but here is the paradox: their performance, measured in labor productivity, tends to fall below the overall average, and even more so compared to other regions. That raised a critical question: Can digital quotient, as a measure of firms’ familiarity with and engagement in digital technologies, help close this productivity gap?

This study offers both quantitative and qualitative evidence in response. In Chapter 2, we conduct descriptive and econometric analyses using World Bank data-including Gender Statistics; Women, Business and the Law; and the Enterprise Surveys-focused on Indonesia, Philippines, and Vietnam. The data reveal that male workers are generally more active and stable in economic participation. Male managers have greater access to digital and financial tools. Firms with digital engagement (i.e., having a website or using social media) report higher sales, while female-led firms show lower sales. Notably, female-led firms that are digitally active outperform their non-digital counterparts-offering a hint that digital quotient might be part of the solution. We go on to detail the empirical modeling using the World Bank Enterprise Survey to estimate labor productivity. A Cobb–Douglas production function is specified, with digital quotient and female leadership as key variables. OLS and quantile regressions show a significant negative association between female leadership and labor productivity, and a significant positive association between digital quotient and labor productivity. Importantly, the coefficient on digital quotient is large enough to offset the negative effect of female leadership in some contexts. However, the interaction term between digital quotient and female leadership is not statistically significant-suggesting that digital quotient may compensate for, but not amplify, labor productivity in female-led firms. Robustness checks using winsorized data, and propensity score matching confirm these results.

In Chapter 3, we turn to real-world voices-via expert consultations and interviews with business leaders-to understand how digital quotient affects female-led firms. Motivations for digitalization ranged from surviving the COVID-19 downturn to expanding sales and strengthening innovation. Many firms relied on support from governments, NGOs, and donor programs. Most leveraged social media and e-commerce platforms, reporting increased sales, wider product portfolios, and better customer engagement. However, digital quotient was also associated with certain challenges, including technical issues, cybersecurity risks, and even unintended shifts in business models.

Finally, this study offers policy implications tailored for ASEAN. Governments should promote digital literacy and quotient, support inclusive digital tools, and amplify success stories to inspire others. Regional efforts should aim to build localized digital quotient indicators and foster programs that reflect ASEAN’s unique entrepreneurial landscape.

Executive Summary

1. Introduction

2. Descriptive Facts

3. Gravity Models of International Migration

4. Empirical Analysis

5. Robustness Checks

6. Conclusion References

In recent decades, European Union (EU) enlargement has substantially altered the continent’s economic and political landscape by lowering barriers to trade, labor mobility, and capital flows. Migration emerges as a central factor in this transformation, especially following the accession of Central and Eastern European countries. This enlargement has intensified interest among policymakers and researchers in the factors driving intra-European migration and its economic and social implications.

This study specifically investigates the interplay between EU enlargement, the Freedom of Movement (FOM) agreements, and Brexit on labor mobility. Although EU enlargement has generally been associated with deeper economic and political integration, its most profound impact may lie in facilitating international migration. By distinguishing between the timing and impact of EU membership and the Freedom of Movement (FOM) agreements—often introduced at different times— the analysis provides a nuanced view of their respective roles.

Employing a gravity model framework with Poisson Pseudo-Maximum Likelihood (PPML) estimation and a heterogeneity-robust difference-in-differences (DiD) approach, this study examines bilateral migration flows across 224 origin-destination country pairs. The results reveal that EU membership significantly increases migration flows, particularly from newer to older member states, indicating a pronounced east-to-west asymmetry. This effect remains robust after accounting for FOM implementation, and further robustness checks confirm the consistency of the findings under different policy timelines and the inclusion of external mobility agreements.

Additionally, the study explores the impact of Brexit on return migration, uncovering a substantial rise in flows from the UK to EU member countries—especially those that joined after 2000—following the 2016 referendum. These patterns highlight the heterogeneous and asymmetric effects of different EU migration policies and suggest that Brexit exerts a stronger influence on return migration than FOM.

Consequently, the findings highlight the importance of policy-specific analysis in capturing the complexities of migration responses to institutional changes within the EU.

As the competition for technological hegemony intensifies between the U.S. and China, major advanced countries around the world, including the U.S., are increasingly strengthening their strategies to protect and foster their technologies and industries in core science and technology fields. The governments of individual countries are expanding R&D investment, reorganizing legal and institutional foundations for technology protection and fostering, and aiming to strengthen national security and industrial ecosystems as well as securing technological competitiveness.

Major advanced economies, such as the U.S., the UK, and the EU, are formulating sophisticated policy frameworks aimed at promoting the growth of core science and technology fields. These frameworks involve easing unnecessary regulations while introducing new measures to safeguard critical technologies. Accordingly, it is essential to conduct a comparative analysis of these countries’ strategies for science and technology development, their approaches to fostering innovation ecosystems, and their industrial policy directions by examining the legal, institutional, and policy innovation strategies in major advanced countries.

Amid intensifying competition for technological hegemony between advanced countries, each country is focusing on securing technological independence and sustainability. The U.S. is intensively fostering high-tech industries such as semiconductors, AI, quantum technology, and biotechnology through its “America First” strategy, and is also restricting foreign investment and controlling technology transfer. The UK is strengthening its strategic choices to overcome the problem of low economic growth following Brexit and improve the UK’s global competitiveness in core technologies, while pursuing R&D investment and regulatory reform in fields such as AI and quantum technology. The EU is working to convert its technological innovation policy, which used to be centered on individual member states, into a more common strategy at the EU level, and is carrying out large-scale R&D investment and regulatory reform to secure the EU’s global competitiveness.

In addition, China has made science and technology independence its top priority in the face of U.S. countermeasures and is accelerating its own technology development in fields such as semiconductors, space-technology, biotechnology, and high-tech manufacturing. As such, major advanced countries are implementing strategic policies to strengthen their technological sovereignty and secure leadership in the global technology competition, underscoring the need for Korea to respond quickly and systematically. Korea also needs a strategic approach to respond to the intensifying global competition in technology, particularly by overcoming the limitations of existing systems and by innovating regulatory reforms tailored to the evolving technological landscape. There is a growing demand for the need to remove institutional barriers that hinder the development of science and technology and to establish a flexible regulatory framework that can accommodate new emerging technologies. In particular, as the perception that regulatory innovation is directly connected to national competitiveness spreads, now is the time for Korea to take active policy measures in response.

In the fields of science and technology, changes in the R&D, production, delivery, and transaction methods of new technologies are leading to conflicts with existing laws and systems, as well as the emergence of new regulatory issues. The phenomenon of “regulatory delay”—caused by the absence of appropriate laws or regulatory gaps—is becoming increasingly severe, posing obstacles to the commercialization of new technologies by companies and research institutions. To address this, major advanced countries are making continuous and focused efforts to promote regulatory innovation. Analyzing these strategies can help us better understand how regulatory innovation is being implemented in the fields of science and technology in major advanced countries.

By investigating and analyzing the implications, promotion strategies, detailed focus areas, and key characteristics of regulatory innovation strategies pursued by major advanced countries to achieve global technological leadership and foster innovative growth in related industries, this study aims to present effective response strategies for Korea to prepare the rapidly evolving future regulatory environment in the fields of science and technology, through a multifaceted analysis of regulatory innovation strategies by areas—that has not been fully addressed in existing research areas.

The first step in investigating and analyzing regulatory innovation strategies in the fields of science and technology in major advanced countries is to select three advanced countries to be studied. The U.S. was selected for its leadership in science, technology, and industrial ecosystems, as well as its global influence on national regulatory innovation strategies. The UK was chosen for its pioneering role in regulatory innovation strategies in the fields of science and technology, and the EU was selected for its role in driving innovative demand in new industrial sectors. These three entities were identified as the major advanced economies to be included in the study.

The next step is to select some fields to be investigated among the various fields of science and technology. In 2024, the Ministry of Science and ICT announced three major game changer technologies (AI-semiconductor, advanced bio, quantum), on the basis of which a total of four science and technology fields were selected: semiconductors, advanced biotechnology, AI, and quantum technology.

The final step is to categorize various areas—such as institutions, governance, standards and certification, ethics, international cooperation, subsidies and tax incentives, experimental testing and scientific-technological capabilities, hostile response policies and strategies, and public/private protection (safety and security)—into three major groups; ① system and governance, ② Fostering and advancing the science and technology ecosystem and ③ technology security. Based on this classification, the study systematically analyzes the regulatory innovation strategies of major advanced countries in the fields of semiconductors, advanced biotechnology, AI, and quantum technology the perspective of these three categories.

Subsequently, the findings of major studies that have investigated and analyzed regulatory innovation strategies in core science and technology fields - such as semiconductors, advanced biotechnology, AI, and quantum technology in the U.S., UK, and EU are summarized as follows.

In the field of semiconductor, the three major advanced economies are working to promote semiconductor production and innovation within their borders, execute export control regulations, and respond to a supply-crisis caused by semiconductor shortages in order to protect their respective technological advantages. Each country is promoting innovative policies that include subsidies, tax incentives, and R&D policy funds in its innovative regulatory framework. The UK is strengthening its strategic choices to maintain and expand its strategic advantage in this sector based on its strengths in semiconductor design and intellectual property, compound semiconductors, and the world’s best research and innovation systems, with a relatively smaller amount of support than the U.S. and EU. In Korea, the so-called “K Chips Act” (amended by the Restriction of Special Taxation Act) was passed at the National Assembly plenary session in February 2025 to strengthen tax incentives for investment, such as the expansion of semiconductor companies’ factories. In addition, special laws for strengthening the competitiveness of the semiconductor industry and innovative growth are being discussed by the relevant committees of the National Assembly.

In the field of advanced biotechnology, the U.S. has been continuously implementing innovation policies to improve the regulatory environment through the Coordinated Framework for the Regulation, the federal government’s basic guidelines for regulating biotechnology products. The UK is pushing for the government’s smart regulatory program to remove regulatory barriers and prepare for the future of regulatory frameworks by explaining regulatory issues related to engineering biology through RHC(Regulatory Horizons Council). In addition, the regulatory sandbox for engineering biology is being promoted through the EBRN. The EU is focusing on simplifying regulatory pathways through a series of measures to promote biotechnology and bio manufacturing in the EU, and is implementing measures to further promote the establishment of regulatory sandboxes to quickly launch them in the market. Korea has enacted and is currently implementing the Biotechnology Promotion Act, which aims to efficiently foster and develop biotechnology by establishing a solid research foundation and promoting the industrialization of biotechnological advancements. In January 2025, the National Bio Commission was launched, and the government unveiled the “Korea Bio Great Transformation National Strategy,” which aims to position Korea among the world’s top five biotechnology leaders by 2035 through sweeping transformations in infrastructure, R&D, and the bioindustry.

In the field of AI, although the US has long led the world in AI technology and scientific advancement, its AI regulatory framework only began to take full shape in 2024. That year, President Joe Biden issued a new executive order titled the “AI Executive Order on Safe AI.” This executive order establishes new standards for the safety and security of AI, protects privacy, promotes civil rights, fosters innovation, and introduces stronger regulations to prevent the misuse of AI.

The UK, through its National AI Strategy, has proposed short-, medium-, and long-term measures aimed at achieving three core priorities: investment in the AI ecosystem, ensuring that the benefits of AI are distributed across all sectors and regions, and establishing effective AI governance. Furthermore, to lead responsible innovation in artificial intelligence (AI) and maintain public trust in the technology, the UK became the first country in the world to publish an AI regulatory white paper titled A Pro-Innovation Approach to AI Regulation, which provides guidance on the use of AI. The UK government subsequently published a Government Response that compiled and addressed questions from various relevant institutions regarding the white paper, thereby presenting a foundational regulatory framework for AI. In addition, the UK is building its AI governance structure by establishing the world’s first government- supported AI Safety Institute and forming a Regulator Ecosystem composed of multiple regulatory bodies. The EU finally approved the “AI Act,” the world’s first comprehensive AI technology regulation, on May 21, 2024. The EU AI governance system has been established as a separate AI Board consisting of the EU Commission, its AI Office, and delegations from EU member states.

Recently, Korea became the second country in the world, following the European Union, to enact an “AI Basic Act,” which is scheduled to take effect in January 2026.

Korea’s AI Basic Act includes provisions for the establishment and implementation of a national AI master plan every three years, the formation of a national-level AI governance structure and support for the innovative development of the AI ecosystem through measures such as securing professional talent, designating AI industrial clusters, building AI testbeds, promoting AI data center policies, and facilitating international cooperation. The Act also addresses AI technology standardization, the establishment of ethical principles, the expansion of financial resources for AI industry promotion, and the prevention of AI-related risks, including administrative fines. It defines “high-impact AI” as a target for regulation and outlines obligations for transparency, safety assurance, and provider responsibility. However, generative AI is largely exempt from the major regulatory provisions.

The US has adopted a strategic and agile approach to AI governance by issuing sector-specific guidelines and recommendations, executive orders, and fostering collaboration with companies and research institutions. This allows for a rapid and flexible response to the fast-evolving AI landscape. Similarly, the UK is pursuing a pro-innovation and flexible regulatory approach, introducing measures to address the misuse of AI and establishing regulations tailored to specific AI use cases. In contrast, the European Union has implemented a risk-based regulatory framework that classifies AI systems into categories such as “unacceptable risk/high risk/limited risk/minimal risk.” It imposes explicit regulatory obligations on AI systems falling under the “unacceptable/high-risk” categories, and includes provisions for general-purpose AI models. Korea, for its part, defines “high-impact AI” and outlines obligations related to transparency, safety, and provider responsibility. However, generative AI remains largely outside the scope of major regulatory provisions.

In the field of quantum technology, the U.S. has developed a comprehensive and broad-based regulatory framework to maintain and develop global leadership. In particular, the U.S. seeks to enhance national security and economic competitiveness through a strategic regulatory framework for quantum research, development, and science and technology. The UK has outlined 13 Priority Actions under its National Quantum Strategy and established the Office for Quantum within the Department for Science, Innovation and Technology (DSIT), which regularly reports to the National Science and Technology Council chaired by the Prime Minister.

In February 2024, DSIT’s RHC released a report recommending a regulatory policy for nurturing the UK’s innovation-friendly quantum ecosystem. The report is based on four core principles—proportionality, adaptability, accountability, and balance—and was prompted by the growing need for proactive discussions on the timing, scope, and form of regulations to ensure stable investment and development in quantum technology. The RHC made 14 recommendations emphasizing the need to establish strong governance, including the development of a quantum technology regulatory framework and the need for a regulatory framework based on standards, guidelines, and responsible innovation practices. DSIT is working on ways to identify regulatory requirements in the future, such as conducting horizon scanning for future regulatory requirements and adjusting proportional regulatory initiatives.

The EU launched its Quantum Technology Flagship in 2018, following the issuance of its Quantum Manifesto in May 2016. This flagship initiative brings together research institutions, industry players, and public funding bodies to consolidate and expand Europe’s scientific leadership and excellence in quantum technologies.

In the Strategic Research and Industry Agenda (SRIA) 2030 roadmap, the EU emphasizes the need to develop independent capabilities in quantum technology development and production to secure global leadership, protect strategic interests, ensure autonomy, and strengthen security—while avoiding dependence on third countries. The EU aims to establish the world’s leading ecosystem that translates lab-scale research into mass production across various scientific and industrial applications. Moreover, the EU highlights the importance of leveraging the economic and societal potential of quantum technologies to strengthen its position as a global player in this transformative field, ultimately positioning Europe as the world’s “Quantum Valley.” Korea’s Quantum Technology Industry Act, along with the National Quantum Strategy and various quantum initiatives, represents a set of innovative policy measures aimed at establishing a research foundation for quantum’s science-technology and systematically fostering the quantum industry. These efforts reflect the pursuit of multi-faceted innovation strategies across the key domains identified in this study. However, concrete strategic initiatives focused on identifying regulatory challenges in the quantum science and technology sector and anticipating future regulatory environments remain limited.

As a strategic response to such regulatory innovation policies in advanced major countries, the following approaches can be considered.

First, it is necessary to establish governance that support innovation across the broader economy while providing recommendations on the prioritization of regulatory reform in alignment with the regulatory environment in the fields of science and technology. Next, it is essential to proactively establish systems and strategies for scanning anticipatively regulatory environments and requirements in the fields of science and technology, and to strengthen integrated regulatory approaches starting from the R&D stage. Next, it is important to establish robust regulatory frameworks for core fields of science and technology and to advance innovation strategies—such as large-scale financial support—in order to secure technological leadership and foster a resilient and competitive ecosystem.

Furthermore, there is an increasing need to enhance global cooperation strategies aimed at ensuring alignment and harmonization with international regulations, grounded in active participation in the development of global technical standards and regulatory frameworks. Additionally, enhancing regulatory sandbox systems in core fields of science and technology will be essential for promoting timely and flexible responses to technological innovation.

As a final consideration, the rapid advancement of technology is increasing the need to redesign anticipative regulatory innovation roadmaps in established fields, and the cycle of these rolling plans is expected to become shorter. It is also a time to initiate discussions on setting the cycle of these rolling plans, establishing clear procedures, and defining the legal basis for their implementation.