Research on CMS decomposition of South Korea’s manufacturing exports to China

Abstract

Abstract This paper analyzes the export performance of South Korea’s manufacturing products to China from 2000 to 2020 by using Constant Market Share (CMS) model. The manufacturing products are mainly electrical machinery, equipment, vehicles, optical photographic, iron and steel, organic chemicals, and related products. According to the analysis, South Korea’s manufacturing products to China had continued to increase in demand of the China market from 2000 to 2014, but it has stagnated or declined since 2015, owing to the development of manufacture-related technology of China and its lower dependence on South Korea’s products. Through CMS decomposition, it is found that: the structure effects in stages of 2000-2015, 2006-2010 and 2011-2015 contributed the most to the change of exports in China market. However, during the period of 2016-2020, it was a high negative level due to the increased self-sustaining power of China. Moreover, the structure effects are mainly from the growth effects, except for the period of 2016-2020, which was from the commodity effect. In all the four stages, the competitive effect has a positive value. Especially, in the period of 2016-2020, it reached a highest level of 620.20%, because of its high technology and high quality. Through second order decomposition, it is found that the competitive effects are mainly from the overall competitive effects, except for the period of 2006-2010, which is mainly from commodity competitive effect. In the case of residual effect, compared with the structure effect and the competitive effect, its contribution to the change of exports is very low. And the residual effects are mainly from the pure residual effects rather than dynamic effects.