China's Crisis and Opportunities for the Korean Stock Market

China, the world's second-largest economy, is assessed to have entered a long-term low-growth phase about a decade ago. The real estate bubble and population migration, which previously drove China's rapid economic growth, have now reached their limits. Currently, real estate regulations and financial instability issues are hindering China's economic growth.

The Evergrande Group, led by Xu Jiayin, a former farmer who once ranked as China's wealthiest person, has gone bankrupt. Along with Evergrande's collapse, Xu Jiayin was sentenced to life imprisonment, and his family members also received long prison sentences and asset forfeiture. This incident is seen as a symbolic case demonstrating the failure and limits of the real estate-based growth model that supported the Chinese economy.

US hostility towards China has steadily intensified since the Trump administration, leading to strengthened economic sanctions. In particular, the US's critical strike, leveraging the division of labor in the semiconductor ecosystem, is significantly impacting the Chinese economy. Among these, the blocking of extreme ultraviolet (EUV) lithography equipment sales by Dutch company ASML is acting as a decisive factor hindering the development of China's semiconductor industry.

President Xi Jinping's consecutive terms or permanent rule align with the common prosperity policy aimed at gaining public support in China. However, as part of this policy, strong artificial regulations have been implemented against IT companies and the private education market. This anti-market policy stance is consequently delaying China's economic recovery, creating a paradoxical situation between the regime's efforts to maintain control and economic revitalization.

Samsung Electronics and SK Hynix are criticized for a strategic misjudgment in maintaining a high-price policy for semiconductors instead of lowering prices. This policy allowed latecomer Chinese companies to enter the memory market. They are criticized for losing the advantage of their past '초격차' (super-gap) strategy and failing to defend their market dominance, even drawing accusations of price collusion.

As Samsung Electronics and SK Hynix concentrated on High Bandwidth Memory (HBM) production, disruptions occurred in legacy (general-purpose) semiconductor production. This led to a shortage of general-purpose semiconductors, causing their prices to surge by more than 20 times. Surprisingly, the profitability generated from HBM was lower than the price increase in general-purpose semiconductors.

The increased production by Chinese low-end memory companies like Changxin Memory and Yangtze Memory is expected to directly impact the profitability of Korean companies. If the prices of low-end memory, which had already risen 20-fold, revert, profitability could sharply decline. Major clients like Apple are expressing fatigue over rising memory prices, suggesting this is a result of the three semiconductor companies missing an opportunity to strengthen their market dominance. Indeed, this market situation is analyzed as one of the reasons for the stock price decline last July.

China's electric vehicle industry grew by learning technology through past acquisitions and collaborations with SsangYong Motor and Beijing Hyundai. However, excessive government subsidies led to oversupply and fierce price competition. Furthermore, policy changes by major countries like the US and the technical limitations of LFP batteries have resulted in lower-than-expected demand in Europe and the US. The Chinese government is facing a situation where it cannot perpetually support struggling companies.

South Korea faces structural economic crises such as population decline and the depletion of the National Pension Service. The number of young men and women of childbearing age has already decreased, requiring decades of effort. However, an analysis suggests that artificial intelligence (AI) can be a new opportunity through a change in perspective. AI's potential for infinite supply could change how inflation is controlled, and South Korea needs to seize AI leadership based on its strong manufacturing foundation.

Improving productivity through artificial intelligence (AI) is essential for the survival of the Korean economy. However, the absence of large language models (LLMs) could bring a major crisis to the domestic AI industry, potentially causing difficulties for major Korean platform companies like Naver and Kakao. Therefore, changes to domestic platforms such as KakaoTalk are urgent, and a national-level strategic approach is absolutely necessary for the survival of the Korean AI industry.

Money ultimately flows to thriving industries. Concentrated investment in future growth industries is crucial, and individuals' university major choices should also be carefully made in conjunction with promising future industries. Currently, the AI sector is emerging as a representative growth industry where money and talent are heavily concentrated.

Concerns about a Treasury bond crisis are growing as the US national debt surpasses $40 trillion. This raises the possibility of a price crash due to an oversupply of Treasury bonds, and the contrast between increased dollar issuance and Bitcoin's scarcity signals new asset market changes. Previously, gold was the only financial alternative when bond values fell, but now new alternative assets like Bitcoin are gaining attention.

Stablecoins are scheduled to be officially sold in the US starting January 18 next year. These stablecoins are expected to adopt a strategy of collateralizing with short-term Treasury bonds. If stablecoins successfully establish themselves, this could paradoxically act as a variable threatening Bitcoin, another cryptocurrency. Especially if the US government succeeds in resolving its Treasury bond issues, there is also a possibility of Bitcoin's value plummeting.

US monetary policy and Treasury bond management are crucial factors determining the direction of global asset markets. In particular, how Treasury Secretary Janet Yellen or former President Donald Trump manage US Treasury issues will significantly affect market volatility. The depreciation of the US dollar is also expected to have a widespread impact across the entire asset market.

I believe the essence of journalism is critique and offering new perspectives, and I emphasize the importance of critical thinking even in an environment where the media is cautious about certain issues. I plan to continue my efforts, including writing books, to provide readers with new insights through future-oriented economic analysis that goes beyond existing analytical frameworks.