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Macroscope | South Korean companies increasingly see India as a viable alternative to China
- Sustained US-China tensions and other internal and external challenges have pushed South Korea to speed up diversifying its trade and investment
- Despite significant hurdles to doing business, India has emerged as an attractive destination for Korean firms such as Samsung, LG and Hyundai
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“Strategic ambiguity” has been South Korea’s foreign policy formula for more than a decade. This is because Seoul’s decision not to take a side between Washington and Beijing – given its close economic ties with China and the presence of US military forces in the country – was regarded as inevitable.
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The continued tensions between the two superpowers – coupled with other external challenges, including the Covid-19 pandemic, high inflation and the war in Ukraine – have further spurred middle-power and export-oriented South Korea to expedite the diversification of its trade and investment portfolio.
Amid such circumstances, a series of legislative measures initiated by the Biden administration to deter China’s growth at the expense of relations with its allies has prompted Seoul to accelerate its pivot from Beijing.
Additionally, despite China’s reopening after the pandemic, South Korea’s trade deficit with China in the first quarter of this year amounted to US$7.8 billion – the first such deficit since the two countries normalised diplomatic relations in 1992 – causing Korean businesses to reconsider the importance of maintaining a China focus.
Against this backdrop, India has emerged as an attractive destination. Its population is expected to surpass that of China by mid-2023, making it the most populous nation on Earth.
02:36
India set to overtake China as the world's most populous country in 2023, UN predicts
India set to overtake China as the world's most populous country in 2023, UN predicts
What makes India more desirable is not just the size of its population but the size of its young population. Only 7 per cent of the nation is aged 65 or above, compared to China’s 14 per cent and 18 per cent in the US. The International Monetary Fund forecasts that India’s real GDP growth will reach 5.9 per cent this year, 0.7 percentage points higher than that of China.
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