In response to the change of internal and external conditions such as the pursuit of sustainable growth and global financial crisis, China is switching the economic growth method to domestic demand-led growth. For this purpose, it is promoting various plans to boost domestic demand such as the improvement of income distribution, expansion of social security system, promotion of new urbanization, and development of service industry, and it is also encouraging the suppression of processing trade, enhancement of domestic companies’ import-substituting capacity and productivity, and industrial upgrading. As a result, the imports for processing trade has been reduced while the general trade targeting China’s internal consumption (domestic demand) is rapidly increasing.
On the other hand, Korea is trying to improve access to China’s domestic market which is showing a rapid growth through the Korea-China FTA and the bilateral economic cooperation between the two countries; however, with the current downswing in Korea’s exports of petrochemical products, displays and general machinery to China, there is a growing need to check its export strategy to China. Thus, this study aims to seek ways to expand Korea’s exports to China by analyzing the structural changes in China’s import market for domestic demand, Korea and other major countries’ export status and competitive relationship. In particular, the characteristics of the import market for domestic demand was analyzed by the processing steps (18 detailed steps) and the type of industry (24 detailed industries), and the competitive relationships between Korea and other major countries (Taiwan, Japan, United States, Germany) in China’s import market for domestic demand were identified through the analysis of market share, market comparative advantage, and export similarity.
This study reveals that slowdown of Korea’s exports to China is because the importance of the areas (processing trade, intermediate goods, electronics and chemistry) where Korea’s exports are concentrated have decreased in China’s import market for domestic demand, and because Korea’s competition with Taiwan and Japan is deepening in the areas where demand is increasing due to the lack of China’s own production capacity. Korea need strengthening of export competitiveness of parts and components for China’s domestic demand; expansion of the market entry for China’s consumer goods such as household food and beverage, electrical equipment, cosmetics whose demand is soaring; value addition and product differentiation in the electronics and chemistry areas with comparative advantages; diversification of export industries; and devising countermeasures against competition with Taiwan (electronic parts and computers related parts and components) and Japan (chemical product related semi-finished products).