The China Risk and Korea's Response

17 Pages Posted: 28 Apr 2016

See all articles by Ho Yeol Lim

Ho Yeol Lim

Korea Institute for International Economic Policy

Hyun-Tai Lee

Korea Institute for International Economic Policy

Koun Cho

Korea Institute for International Economic Policy

JungEun Lee

Korea Institute for International Economic Policy

Date Written: December 31, 2015

Abstract

Recently, the Chinese economy is undergoing a slowdown in the real economy, falling stock prices in the stock market, and devaluation of the yuan in the foreign exchange market. This research analyzes the current condition of the Chinese economy, evaluating the risks in China's real and financial economy. It also estimates the effects such risks can have on the Korean economy, presenting suggestions for Korea in responding to the China risk.

The Chinese economy has maintained an annual average of 9.7% growth since its reform and opening up, but this slowed down to 7.3%~7.7% during 2012~2014, and plunged to 7.0% in the first half of 2015, entering the so-called "era of a new normal". Factors such as excessive production facilities, local government debt, adjustments in the real estate market and financial risk are hindering the nation's economic development.

China's stock price, which crashed due to China's economic slowdown and a growing distrust in the government's ability to manage the stock market, nonetheless is not on the verge of collapse, as the total value of listed stocks remains above the trend line and the total trade volume also remains high. Moreover, as the correlation between stocks and the real economy is still low, the impact of the recent stock market crash on the real economy will be limited.

As China's real economy is projected to continue undergoing a recession, it is important to utilize the opportunities that come from qualitative changes in the economy, while preparing for the risks that economic slowdown entails.

Keywords: China risk, Korea's response, new normal

Suggested Citation

Lim, Ho Yeol and Lee, Hyun-Tai and Cho, Koun and Lee, JungEun, The China Risk and Korea's Response (December 31, 2015). KIEP Research Paper No. World Economy Update-15-25, Available at SSRN: https://ssrn.com/abstract=2771492 or http://dx.doi.org/10.2139/ssrn.2771492

Ho Yeol Lim (Contact Author)

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Hyun-Tai Lee

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Koun Cho

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

JungEun Lee

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
22
Abstract Views
258
PlumX Metrics