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By Yi Whan-woo

Vietnam has become the source of Korea's largest trade surplus for the first time as the economic partnership between the two countries has expanded over the past few years amid shrinking trade with China, according to data released Wednesday.

The Ministry of Trade, Industry and Energy said Korea posted a surplus of $34.25 billion in trade with Vietnam in 2022, with exports to the Southeast Asian country totaling $60.98 billion and imports from it amounting to $26.72 billion.

The nation's trade surplus with the United States ranked second at $28.04 billion, followed by Hong Kong ($25.79 billion), India ($9.98 billion) and Singapore ($9.86 billion.)

"The data shows that Korean businesses have actively advanced into Vietnam as it emerges as a manufacturing hub for global enterprises," the ministry said, adding, "Such a presence by the Korean firms thus has helped the two countries to grow into closely-connected economic partners."

Korea and Vietnam established diplomatic relations in 1992, overcoming the past hostility triggered by Korea's participation in the Vietnam War in the 1960s and 1970s as a U.S. ally. It has been a major investment destination of Korean firms since then, including Samsung which accounts for around 20 percent of Korea's exports to Vietnam.

Thanks to political stability and a young population, Vietnam is rapidly substituting China as a major manufacturing site. Vietnam's statistics agency estimates the country's economy grew 8.02 percent in 2022, which is the highest since 1997.

The trade volume between the two countries soared 164 times since 1992 to $80.7 billion. The amount of mutual investments also jumped 145 fold to $2.5 billion.

Bilateral trade was heavily concentrated on textiles, clothing and other labor-intensive goods in the beginning, but now encompasses high-value-added products, according to the Korea International Trade Association (KITA). Among them are semiconductors and wireless communication devices.

Korean business investments in Vietnam were mainly focused on the manufacturing sector, but over time, has expanded to banking, insurance and e-commerce, among others.

Meanwhile, Korea's trade surplus with the U.S. increased by 14.5 percent year-on-year in 2022, with exports surpassing the $100 billion mark for the first time.

China ranked 22nd, falling from third place in 2020 and 2021 and second place in 2019, in terms of Korea's trade surplus.

Korea's surplus in trade with China totaled $1.25 billion last year, with exports declining significantly due to the COVID-19 lockdowns in major Chinese cities while imports of raw materials increased compared to previous years.