South Korea Discovers Increased Efforts to Mask Foreign Goods as Exports
- South Korean customs report increased attempts to label foreign goods as domestic exports.
- The World Bank forecasts 4.5% growth for East Asia driven by artificial intelligence exports.
- AI-related capital spending is projected to reach $2.9 trillion from 2025 to 2028, raising concerns about market stability.
South Korea’s customs agency announced on Monday that there has been a rise in attempts to disguise foreign products as Korean exports, particularly from China, as a strategy to evade U.S. tariffs implemented by former President Donald Trump.
In related economic news, the World Bank has updated its growth forecast for the East Asia and Pacific (EAP) region, attributing the anticipated increase to a surge in artificial intelligence (AI)-related exports. This report, released on Tuesday, indicates that the region’s economy is expected to grow by 4.5% in 2023, which is 0.3 percentage points higher than previous projections made in April. However, growth is forecasted to decline slightly to 4.4% in 2027 and to 4.3% in 2028.
Vietnam was highlighted as the major economy with the largest forecast upgrade, raising its growth projection by 1.1 percentage points to 7.4%. Notably, the growth in the EAP region heavily relies on AI manufacturing and exports, which accounted for over half of export growth in most economies, and more than 70% in countries like Malaysia, the Philippines, Thailand, and Vietnam. In total, China, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam exported $1.4 trillion worth of AI-related goods over the 12 months leading up to April.
Furthermore, South Korea’s exports reportedly soared by 83.5% in September, reaching a record $120.9 billion, with semiconductor chips representing half of those shipments. The World Bank noted that two major chipmakers, Samsung and SK Hynix, constituted 43% of the benchmark Kospi index’s value as of late April.
Amid these developments, the World Bank has expressed concerns regarding the AI boom’s reliance on capital expenditure, which currently accounts for approximately 6% of U.S. GDP. The rapid rise in AI investment mirrors the tech boom of the early 2000s and is at risk of reversing. The Bank for International Settlements cautioned in its June economic report that the current boom is reminiscent of the dot-com bubble of the 1990s.
The report also identifies the opacity of financing for AI ventures, with about $800 billion of the projected $2.9 trillion in AI-related capital expenditure for 2025-2028 expected to come from private credit. The portion of AI-related lending is predicted to rise sharply, from an 18% average over the past five years to 34% by 2025. However, this sector has seen markdowns, outflows, and defaults in the current year, compounding the risk of financial instability.
Additionally, the tightening of financial conditions brought on by central banks raising interest rates could slow the AI investment boom. The U.S. Federal Reserve recently raised rates for the first time in more than three years and suggested another increase may occur this year. A slowdown in U.S. growth by 1 percentage point is projected to impact emerging markets more significantly, with East Asia’s economy poised to feel the effects due to its integral role in the AI supply chain.
Finally, Taiwan’s statistics bureau recently increased its growth forecast for 2026 from 9.6% to 11% due to anticipated AI demand but cautioned that challenges faced by the high-tech sector could have a more substantial negative impact on the local economy than initially expected.
News Courtesy of CNBC
