The competition for global dominance between the United States and China has evolved beyond diplomatic issues, reshaping the world economic order. Just two decades ago, China was known as the 'world's factory,' but it has since emerged as a formidable competitor to the U.S. across advanced industries, including batteries, electric vehicles, solar energy, shipbuilding, robotics, rare earths, patents, and artificial intelligence. Meanwhile, the U.S. retains its strongest cards, including the dollar as the world's reserve currency, advanced semiconductor design, capital markets, an innovative ecosystem, and military power. The future likely points to a 'G2 system' where neither country fully dominates, but both exert influence in their respective spheres.
The challenge lies with South Korea. The country has a unique economic structure that heavily relies on the U.S. for security and on China for trade. The U.S. is South Korea's most important ally and a partner in advanced technology, while China remains its largest trading partner. A simplistic approach of choosing sides could impose greater burdens on the South Korean economy.
As U.S.-China tensions escalate, South Korean companies face simultaneous demands from both sides. The U.S. calls for supply chain restructuring and advanced technology cooperation, while China leverages its market, raw materials, and production bases to exert influence. Key South Korean industries, including semiconductors, batteries, automobiles, shipbuilding, and displays, find themselves at the center of this conflict. South Korea must now position itself not as a follower of international trends but as a nation that develops its own survival strategies within the changing order.
The starting point for this strategy is 'strategic pragmatism.' While maintaining values and principles in diplomacy, economic approaches should center on national interests. Security cooperation should remain anchored in the South Korea-U.S. alliance, but efforts must also be made to diversify markets and reduce dependence on specific countries in trade.
Industrial policy must also evolve. Competing on volume, as China does, is not a viable strategy. South Korea should focus its capabilities on areas where it can lead global standards, such as eco-friendly ships, autonomous navigation, advanced semiconductor processes, next-generation battery technologies, and specialized artificial intelligence models. Failure to transition from a catch-up industrial policy to a super-gap industrial policy could result in South Korea losing its competitive edge between the U.S. and China.
Stabilizing supply chains must be elevated to a national strategy. Rare earths, critical minerals, semiconductor materials, energy, and food are no longer just issues for individual companies. A breakdown in supply chains can shake entire industries. A long-term national plan is needed, encompassing expanded overseas resource development, strategic stockpiling, joint investments with allied countries, and the development of recycling technologies.
Above all, urgent innovation in the national system is required. The U.S.-China competition is not just a corporate rivalry; it is a contest of national competitiveness. Without robust support for research and development investment, talent cultivation, regulatory innovation, and rapid decision-making processes, no industry can sustain growth. A national-level strategic control tower that coordinates industry, technology, trade, and security must be strengthened. In the era of technological hegemony, the speed of policy implementation itself becomes a competitive advantage.
The South Korean economy stands at a new turning point. The past 30 years were characterized by growth while chasing advanced nations, but the next 30 years will require maintaining competitiveness between the two superpowers, the U.S. and China. The formula of relying on a single country for growth is no longer applicable.
The answer for South Korea in the G2 era is clear. It must become a nation with technologies and industries that cannot be easily replaced by either side, rather than merely balancing between the U.S. and China. Practical diplomacy centered on national interests, a super-gap industrial strategy, resilient supply chains, and a world-class talent and innovation system are essential. This is the path for South Korea to remain steadfast amid the U.S.-China power struggle and the most reliable national strategy for safeguarding the prosperity of future generations.
* This article has been translated by AI.
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