Surrounded by China on the one hand and Japan on the other, the geography of Korea is a blessing and a curse.
Its relationship with its larger neighbors has always been complicated.
But in recent decades, this proximity has been beneficial to Korea’s growth.
Its economy has boomed in part due to China’s extraordinary rise and hunger for Korean products and services.
Although Korea has benefited from its proximity and close ties to the Chinese economy, it knows that such ties also pose major risks.
“China accounts for about a quarter of Korea’s total trade. As Korea’s economic structure is highly dependent on exports, economic recovery from China could be fatal,” said economist Kim Gwang Seok.
“Korea is afraid of China.”
But while China may have an overall economic advantage over South Korea, Korea has a big card up its sleeve; it is now one of the most culturally influential nations on earth.
South Korea bore the brunt of China’s anger
In recent years, Australian producers have learned the hard way that China is willing to disrupt trade in order to make a political point.
Australia’s exports of barley, lobster and wine to China all fell sharply after Chinese leaders took offense at a number of perceived weaknesses, including a call for an inquiry into the origins of COVID-19.
South Korea first learned its lesson five years ago.
In 2016, the South Korean government had agreed to install a US missile defense system, Terminal High Altitude Area Defense or THAAD.
The South Koreans said it was about protecting the country from North Korean aggression, but China saw it differently, as a control of its own military capabilities.
Chinese Foreign Minister Wang Yi said at the time that it would “directly harm China’s strategic security interests.”
After lobbying diplomatically in vain for the plan to be shelved, China tensed its economic muscles.
Through a series of measures, the Chinese government punished parts of South Korea’s economy, including department stores, exports, K-pop groups, and outbound Chinese tourism.
“As Chinese tourists account for more than half of the total number of tourists to Korea, whose Chinese tourists are blocked as in the case of the THAAD reprisals, Korea’s travel services were almost paralyzed,” said Kim, from the Department of Korean Economy and Industry.
“Different service industries associated with travel services, such as airlines, duty free shops, travel, hotels and accommodation companies, all suffered at the same time.”
South Korea’s vulnerability to Chinese coercion was exposed, and the country began diversifying its markets to reduce its dependence on the economic superpower.
Recently, China’s war on ‘sluts’ was seen by some as an attack on one of Korea’s other economic engines, K-pop.
Although the downfall should be aimed specifically at Chinese pop stars who were considered too feminine, given how much they drew their signals from their Korean contemporaries, it again showed how a change in politics in China could have an overall impact on Korea.
South Korea’s cultural and economic capital is booming
Despite these setbacks, South Korea in 2021 has never had so much social and economic capital.
The country has surpassed almost everyone else in terms of coping with the pandemic storm. Despite the fact that borders have been set up or strengthened all over the world, this very export-oriented country has had a fantastic 2021.
The president says he expects exports to hit $ 630 billion this year, well above the previous record of $ 604.9 billion set back in 2018.
It is the fastest recovery among the G20 nations. The OECD expects South Korea to grow by 4%. next year.
There seems to be an insatiable hunger for South Korea’s high-tech gadgets, including the basic building block, computer chips.
Consumers around the world who strive for Ulzzang – “the best face” – buy every single Korean beauty product they can get their hands on, from sheet masks to snail serum.
Since breaking into the U.S. market around 2011, the industry has grown dramatically, with a study predicting K-beauty could be worth $ 13.9 billion in 2027.
International consumers are also thirsty for Korea’s pop and movie stars.
The supergroup BTS continues to set new records for their production and has recently collected the American Music Award for Best Artist to complement the billions of streams and views of their music and videos.
Last year, Bong Joon-ho won the Parasite Academy Award for Best Picture. This year, Squid Game has become a massively surprising TV hit.
Both artistic representations provide a more complicated picture of modern Korea than the saccharine, purposefully non-confrontational music embodied by K-pop acts like BTS.
But their popularity and recognition shows that the world is interested in South Korea and wants to buy what it sells.
Riding on ‘Hallyu’ or ‘Korean wave’
The Korean cultural progress itself was not a coincidence. The South Korean government recognized the soft power and cultural exports and has been active in cultivating the sector.
Now that the so-called ‘Hallyu’ or ‘Korean wave’ is washing through the region, it is gathering its power to help sell other Korean products.
“Hallyu’s boom has provided a new opportunity to promote Korean products,” said Kim Hyun-beom, head of consumer goods at the Korea Trade-Investment Promotion Agency (KOTRA).
“The recent popularity of the Korean pop culture industry, such as K-pop, K-dramas and movies, naturally helps to promote Korean consumer goods in other countries.”
Some producers are cashing in directly on Korea’s current cultural power.
Baek Seung’s company NP Inc produces the technology used for relatively inexpensive but glossy K-pop videos.
He says that although NP Inc is a private company, the government still provides critical support.
“We receive comprehensive support from the government for the business of creating content and the business of doing LED-based studios, making it possible to export content such as K-dramas, K-pop and K-movies,” he said.
While Korean culture cache organically can give Korean products some reflective glow, the government goes much further by trying to connect culture and products directly.
KOTRA puts up stars from Korean pop culture to help promote products from small Korean manufacturers, with K-pop star faces adorning the packaging of K-beauty products.
“We use influencers to help SMEs increase product awareness and increase exports,” said KOTRA’s Mr Kim.
Economist Kim Gwang-seok says the government is right in focusing on new markets.
“Economic power in Southeast Asia and West Asia continues to grow,” he said.
The income per. per capita is rising at a rapid pace and the economic growth rate is very high.
“Countries like Indonesia and Vietnam have a significant population, so the market potential is very high,” Kim said.
“We do not want to leave the Chinese market altogether, but rather maintain the current market while concentrating on the new market.
“It’s an organic way to be less dependent on just one country.”