Toward Rivalry and Decoupling: South Korea's Changing Economic Dynamics with China

Over the past decade, Sino–Korean relations have been based on strong economic interdependence and mutual reciprocity. However, the post‐pandemic era (2022–2023) marks a critical turning point as the mutually beneficial and complementary model between China and Korea has undergone a fundamental shift. In 2023, the latter's trade balance with the former transitioned from a surplus that had sustained for 30 years to a deficit. This transformation is driven by multiple factors, including the US–China global rivalry, the latter's accelerated technological advancements and growing industrial self‐sufficiency, and Korea's strategic distancing from it. This study examines the evolving dynamics of Sino–Korean economic relations, highlighting a transition from strategic partnership to emerging rivalry and decoupling. The changing dynamics between the two nations reflects a synergistic interplay of their politico‐economic policy choices. From China's perspective, rapid advancements in high‐tech industries and enhanced technological capabilities have eroded Korea's competitive edge in mid‐ to high‐tech sectors, intensifying exports and industrial competition. From Korea's perspective, the Yoon Suk‐yeol administration shifted away from its previous hedging strategy amid escalating Sino–US competition, fostering closer collaboration with the United States and regional allies in Asia. South Korea's state‐driven reshoring efforts, supply chain diversification strategies, and participation in frameworks such as the Indo‐Pacific Economic Framework aim to reduce economic reliance on China.