Asia Economy

This worries SKorea more than a US rate hike

South Korea FinMin: We are different from other EMs

South Korea has sufficient provisions in place to guard against U.S. Federal Reserve rate hikes, but the same cannot be said of a slowdown in neighboring China, admits finance minister Choi Kyung Hwan.

"We have many preps in place for the pending rate hike from the U.S.," Choi told CNBC on the sidelines of an International Monetary Fund meeting (IMF) in Lima, Peru. "We do not anticipate any abrupt shock to our economy."

South Korea's buffers include high currency reserves and a strong current account position, he said.

In the first half of the year, Asia's fourth largest economy posted a current account surplus of $52.4 billion, up 33 per cent on year and the highest for any six-month period, driven by a collapse in the value of energy imports. Current account measures the flow of goods, services and investments into and out of the country.

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The country isn't totally immune to external headwinds, however.

"China represents a key opportunity for us at the same time it also represents a threat as well," Choi said.

South Korean President Park Geun-hye meets with Chinese President Xi Jinping at the Great Hall of the People in Beijing, on the sidelines of the Asia Pacific Economic Cooperation (APEC) meetings.
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"If China does slow down, because one fourth of Korean exports are destined for the Chinese market, it will be inevitable that our economy will be impacted," he said.

Ebbing demand out of China has taken a sharp toll on Korean exports in recent months. Exports slumped 8.3 percent in September from a year earlier, following a 14.9 percent decline in August.

"We are trying to change our export strategy. Up to now, we've mostly been exporting intermediate or capital goods to China. But as China centers more on domestic demand, we want to change our strategy to focus more on final goods," he said.