Deeper economic integration between China, Japan and Korea to have mixed effects on firms

Economic integration between China, Japan and Korea will continue to deepen despite China's focus on reducing its dependence on foreign suppliers and developing its technology capabilities, said Moody’s recently.
 
China's booming demand for tech products will continue to boost Korean and Japanese companies, but Chinese competitors pose a long-term threat amid strong government policy support, the credit rating agency noted.
 
The decades-long economic integration between the economies of China, Japan and Korea will continue in the coming years despite China's strategy to reduce dependence on foreign suppliers and develop its
long-term technology capabilities, the firm added.
 
"Even with the dual circulation model, China is unlikely to meet its growing demand for advanced technology products through domestic capacity alone over the next couple of years. At the same time, China's market still has a large potential to expand and the Chinese government will likely pursue its market opening strategy," said Lillian Li, a Moody's Vice President and Senior Credit Officer.
 
As a result, Korean and Japanese companies will continue to export capital goods, key tech components and consumer products to China or make investments in certain tech sectors in China, deepening the
integration of the three countries over time, she added.
 
However, China's intensified focus on developing its domestic market as part of the dual circulation strategy will increase the capacity of some domestic firms to compete with companies from Japan and Korea in the
Chinese and overseas markets over the next five to ten years, Li pointed out.
 
Sustained geopolitical tensions will not thwart growing economic integration, according to Moody.

Japan and Korea, as traditional allies of the US in the region, will confront increased tension between their economic integration with China and their security ties with the US, the firm said.

Even if heightened geopolitical tensions complicate the relationship between the three countries, it will not reverse the ongoing economic integration, Moody’s predicted.