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China Briefings

Reports on China issued by Samsung Economic Research Institute

Emergence of the Parts, Materials and Equipment Industries and its Implications

Emergence of the Parts, Materials and Equipment Industries and its Implications

BOK Deuk-Kyu

Aug. 30, 2012

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Recently, China's competitiveness has strengthened in terms of the price and quality of intermediate goods (parts, materials, equipment). Accordingly, increasingly more end goods are being made from Chinese intermediate goods. As such, China has emerged as the world's largest exporter of parts and materials since 2010 and has been the world's largest machine tool manufacturer since 2009.

China's ever-strengthening competitiveness in intermediate goods has a great ripple effect. First, it will result in a dent in Korea's export to China. Second, it will intensify competition in new industries. Third, it will present Korean companies' competitors which use Chinese intermediate goods with strong price competitiveness. Korea needs to understand Chinese intermediate goods' strengthening competitiveness and its ripple effect, reinforce its relevant infrastructure and nurture talents specialized in intermediate goods manufacturing and research. By doing so, it has to develop more advanced intermediate goods and nurture itself into a manufacturing hub.

Not to be beaten by China's rapidly growing intermediate goods industry, Korean intermediate goods companies should develop the latest technologies and advanced products ahead of their Chinese counterparts. Also, they should target China's ever-expanding domestic market while easing trade barriers of intermediate goods and preventing cutting-edge technologies from being leaked.

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