Seoul: China's manufacturing sector could further strengthen its global dominance amid trade tension with the United States, potentially posing a risk to South Korea and other manufacturing-focused countries, South Korea's central bank said Friday.

According to Yonhap News Agency, the Bank of Korea (BOK) stated in a report that even if the U.S. eases its tariff policies, the ongoing competition between the U.S. and China is expected to persist. China is anticipated to continue diversifying its export destinations, which could mitigate the short-term decline in exports to the U.S. and, over the longer term, expand the presence of China-made products in emerging and other non-U.S. markets.

The report highlighted a significant shift in China's export patterns, noting that in the second and third quarters, China's exports to the U.S. dropped by 26 percent. However, during the same period, China's shipments to Europe, the Association of Southeast Asian Nations, and Africa increased by 12 percent. This diversification strategy has been a key factor in the acceleration of China's customs-based export growth, which rose from a 5.6 percent on-year increase in the first quarter to 6.1 percent in the second quarter, and further to 6.5 percent in the third quarter.

The BOK further warned that if China's robust manufacturing competitiveness is combined with advancements in artificial intelligence (AI) and other technologies, its position as the world's factory could become even more established. This scenario could present significant challenges for countries with manufacturing-centered economies, including South Korea, Germany, and Japan.