The influence of China on the South Korean economy is increasing as Seoul's trade dependence on China has deepened and Chinese investors are expanding their purchases of Korean assets, data showed Thursday.

The weight of Korea's exports to China accounted for 25.1 percent of its total overseas shipments in the January-August period, up from 23.4 percent the previous year, according to data by the central bank.

South Korea's trade surplus with China stood at a combined US$29.4 billion in the first eight months of the year, larger than the country's total trade surplus of $24.3 billion seen in the cited period, according to the customs office.

The weight of South Korea's trade with China made up for 21.1 percent of the total trade volume in the January-August period, up from 20.5 percent in 2009 when the portion surpassed the 20 percent mark for the first time in eight years.

The data underpinned a growing influence of the world's fastest growing economy on South Korea, indicating that Korea's consumer inflation could be more affected by price swings in China.

China is also increasing its influence on the Korean financial markets by snapping up South Korean treasuries, analysts say.

In an apparent bid to diversify its foreign reserves, China has bought Korean government debt this year, with its net purchase of Korean assets reaching around 2.9 trillion won ($2.54 billion) in the first eight months of 2010. In the cited period, foreign investors bought a net 16.9 trillion won worth of local bonds, industry data showed.

South Korean treasuries are viewed by foreign investors as attractive investment vehicles as they offer relatively higher returns, and an expected appreciation of the Korean currency gives them chances to chalk up foreign exchange profits as well.

 

source: Yonhap news