SEOUL, Dec. 4 (Yonhap) -- China's economic slowdown is forecast to pull South Korea's potential growth rate down sharply in the coming decade, given Korea's high dependency on the world's second-largest economy, a local think tank said Tuesday.
The Hyundai Research Institute (HRI) said in its latest report that South Korea needs to reduce its excessive dependency on the Chinese economy in order to maintain steady economic growth in the future.
"The South Korean economy will face limits in expanding further by relying on Chinese demand as its neighboring country is set to reach a mature economy," said the report by Joo Won, a senior researcher at the HRI.
South Korea's exports to China accounted for around 13 percent of its gross domestic product in 2010 and 2011, marking the second highest dependency among its Asian trading partners after Malaysia with 15 percent, according to the report.
Given its high dependency on China's economy, South Korea may see a drop in its potential growth rate as China pursues a lower growth policy in the coming years, said the HRI report.
The report also said that as China's potential growth rate declines, South Korea's potential growth will fall by 0.9 percentage point to 3.4 percent between 2010 and 2020, and drop further 0.8 percentage point to 2.6 percent in the 2020-30 period.
The potential growth rate refers to the maximum possible rate at which an economy can expand without triggering inflation.
The HRI report said it is necessary for Asia's fourth-largest economy to carve out a post-China market to deal with a drop in growth potential, recommending emerging countries in South America, Southeast Asia, Africa and the Middle East, including Argentina, Thailand, Kuwait and Nigeria.
"Businesses should make inroads into the regions after reviewing those countries' market environments and possible risks, and the government is also required to expand diplomatic and economic cooperation on the governmental level," said the report.
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