Formerly an economics and humanities student at UCLA, Oe Kaori is now an intern for the United Nations.
Trading in the Billions
South Korea exported $233.72 billion worth of goods last year. It was followed by the United States (exports worth $185.76 billion), China ($15.89 billion), Japan ($14.82 billion), Germany ($13.49 billion) and the United Kingdom ($13.31 billion). South Korea exports semiconductors to the US and BMWs to Germany.
So what are South Korean exports? Semiconductors: South Korea is the world's largest producer and exporter of computer chips. It also exports watches and machinery. Machinery: Machinery exports include parts of oil and gas plants and oil rigs, construction equipment, cars and ships. Auto exports are mostly cars, ranging from commercial vehicles and buses to sports utility vehicles and luxury models like BMWs. Electric appliances and electronic equipment: The country is a leading exporter of household appliances like washing machines and refrigerators, as well as commercial electrical machines.
The Bank of Korea raised its growth forecast for the Korean economy, predicting 3.0 percent growth for the second quarter of this year. That's about what the IMF says it will be.
It is also a leading exporter of vacuum cleaners, air-conditioners and electric generators. Machinery used in high-end manufacturing like automobile, semiconductors, appliances and shipbuilding, mainly goes to the US. Electronic equipment mostly goes to China. Watches: South Korea is the second largest producer and exporter of watches, which go to the US and Europe.
Petroleum and coal: South Korea is the world's fourth largest producer and exporter of petroleum and coal. Its biggest exports include petroleum and oil. Financial products: South Korea is the world's fourth largest exporter of financial products, with a strong presence in the US and Japan. However, it has less production in Europe, as only about 10 percent of its exports are used there. Foodstuffs: South Korea is the world's fifth largest exporter of foodstuffs, mainly rice, chicken and beer. Agency staff writer Lee Kyung-min contributed to this story.
The Banking Industry in South Korea
The banking industry in South Korea is a pillar of the economy, and last year that activity accounted for almost half of total job creation in the country. Yet in many cases the money comes with unusual strings attached, and that has contributed to the dramatic growth of an industry-wide financial crisis that threatens to spread through other parts of the industry.
The financial crisis began last May when an initial wave of customer complaints started to emerge about loans made to so-called “entrepreneurs.” These are people who borrowed money from banks to start businesses like restaurants or grocery stores but never repaid the money.
Financial regulators initially blamed the problem on the loans. But in September, prosecutors opened an investigation into an aspect of the crisis that hadn’t previously been reported: a big increase in complaints about promises of instant cash advances, or J-Cash, from South Korea’s nation-wide consumer finance company called MoneyNet.
The problem is that those loans are designed to help people without checking their credit history. But some borrowers who used MoneyNet to get J-Cash ended up getting such large sums of money that their incomes dropped, forcing them to sell their assets, including cars, to cover the bills. “As soon as the customers sold their cars to get money to pay the debts, they lost their income,” says Moon So-ra, a spokeswoman for MoneyNet, adding that the cars have been sold, and the borrowers have been fired from their jobs. “We are cooperating with police, prosecutors, the Justice Ministry and consumer groups in an investigation of our borrowers.”
As the investigation continues, the fallout has become clear, from suicides to civil lawsuits to a possible consumer backlash against the banks. This week, the head of another consumer finance company, Oxon Finance, which deals with bank accounts and loans to cover everyday purchases, was arrested in connection with an alleged bribery scheme. Another consumer finance company, Finance Max, has decided to halt its credit line for both individuals and businesses, says chief executive Kang Seung-joon, and analysts estimate that the credit lines represent about one-third of the consumer finance industry.
The company’s shares have fallen by 60 percent in the last month. Regulators and lawmakers blame the problems on the banks, whose lenders and board members were members of the consumer finance company boards. In the wake of the scandal, top executives from Bank of Korea, the country’s central bank, as well as the state-run Korea Deposit Insurance Corp. and the Korea Credit Bureau, which collects consumer complaints, have traveled to South Korea to warn banks about their legal and social responsibilities.
One reason for the government’s focus on banks is that most consumers get their mortgages from banks. That provides the government with a powerful lever to force banks to be more responsible with their loans. In the wake of MoneyNet, the government has been examining the way that banks use the loans. Bank of Korea chairman Lee Ju-yeol has announced plans to tighten regulations on the credit line, but it is not clear whether banks will be required to report the J-Cash that they give borrowers. “Banks have to find out the extent of the J-Cash before they can set regulations about it,” says Park Ji-hyun, a policy adviser to the minister of culture and tourism. “They have to think about whether this will affect lending and whether customers will find the regulation strict enough.” The government has also ordered prosecutors to investigate the debts.
In one suicide that has become the symbol of the crisis, a Korean businessman killed himself in November by drinking cyanide after losing most of his businesses, including a winery and a cheese factory. “The problem is that the J-Cash is too easily given out,” says Seung-jo of the consumer advocacy group. “The banks don’t check borrowers.” Some believe that the banking crisis will hurt Korean society more than hurt banks. Kim Moon-yong, a civil rights lawyer, says that the suffering of borrowers may be worse than that of the banks. “When a debtor is sentenced to jail or dies, they do not have the option to switch banks,” says Kim, who has been involved in some 1,300 lawsuits. “Customers’ debts can eat up their assets. The customers are forced to do this. The banks won’t stop lending just because borrowers default.” Kim believes that the banks have become the ones punishing borrowers. But while the government has moved to protect borrowers, one member of the National Assembly has gone even further. Moon Moon-won of the opposition Democratic United Party proposed a bill to outlaw J-Cash and to give consumers a say in who is allowed to give them loans.
A recent survey by the Ministry of Culture and Tourism found that 57 percent of Koreans want to see a law banning J-Cash altogether, even if it costs banks income. “These banks will likely pass on the J-Cash costs to borrowers,” says Lee Su-jeong, an analyst at Korea Investment and Securities. “Some people think this may cost banks money, but what is more important is that the J-Cash has become a financial tool to destroy Korean society.”
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2020 Oe Kaori