South Korea needs to set up a comprehensive competitive strategy to stay ahead of China in high-end products, the Finance Ministry said Sunday.

In a policy review outlining recent developments taking place in the world’s second largest economy, the Ministry of Strategy and Finance said Chinese products are already competing with South Korean goods in markets around the world.

It said Beijing is pushing to produce more value-added products and making inroads into emerging markets, fueling the need for South Korea to secure its technological competitiveness.

“A fresh plan is needed if the country is to guard its competitive edge,” the ministry in charge of the country’s overall economic policy said.

The ministry said because there is a risk that outbound shipments to China may decrease in the future, local companies must take steps to diversify their export destinations.

Export growth to China fell to 14.9 percent in 2011 from a surge of 34.8 percent in the previous year.

At present, China buys 24.2 percent of all South Korean products, far more than the 10.1 percent and 10.0 percent for the United States and the European Union, respectively. Japan accounts for 7.1 percent of Seoul’s exports.

In addition, the ministry proposed that South Korean companies should pay closer attention to entering China’s rapidly emerging service market, which could fuel business growth.

It said there is a need for firms to move away from concentrating on shipping manufacturing components and capital goods that are used in China to make finished goods. Those finished goods are then shipped abroad.

“There is a market for durable goods such as cars, consumer electronics and furniture that can be tapped,” the ministry said.

China also has the potential to be a good market for South Korean cosmetics and food products.

Besides calling for change in how local companies view China, the finance ministry said there is a need to keep close tabs on the country’s economy and its trade ties with the rest of the world.

It said potential trade disputes with the United States and the World Trade Organization could adversely affect China’s exports. Such developments can directly impact on bilateral trade between Seoul and Beijing.

Washington has been pressuring Beijing to not manipulate its exchange rates and also reported the country to the WTO for restricting the export of rare earth elements that are vital in many high-tech industries. 

(Yonhap News)