The Impact of Chinese Economic Structural Changes on Korea’s Exports to China*

We examine the structural changes of the Chinese economy and analyse how those changes have affected Korea’s exports to China. Focusing on the evolution of Chinese development strategy and the changing role of China in global value chain during 2000s, we separate the role of Chinese external demand and domestic demand in Korea’s exports to China. We also shed light on the driving force among Chinese GDP expenditure components in Korea’s exports to China for different periods of time. The subsample analysis shows that Chinese external demand had a significant impact on Korea’s exports to China before 2008, while Chinese domestic demand became important afterwards. More specifically, we find that Chinese investment is the most dominant expenditure component in determining Korea’s exports to China in recent times.