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South Korea
Intelligence for Better Decision Making
Rising Household Debt Alters Borrowing Patterns and Slows Private Consumption in South Korea
Dec. 1, 2025 | HouseholdsSouth Korea’s rapid household debt growth is reshaping lending patterns, elevating borrowing costs and dampening private consumption.
**Year-end volume limits at the country’s five major commercial banks have effectively capped mortgage lending.**
In November, outstanding household loans rose by 1.53 trillion won—slower than October and barely above September’s gain. Mortgage balances, at roughly 611 trillion won, recorded their smallest monthly increase in one year and eight months, prompting some banks to suspend new mortgage application counters.
**By contrast, unsecured household lending surged by 1.14 trillion won in November, marking the largest monthly increase in over four years.**
Personal overdraft balances alone expanded by 917.1 billion won—more than four times the growth of other unsecured loans—as borrowers tap credit lines to offset restricted mortgage access and to fund equity and other asset investments.
**Household lending rates have climbed alongside rising bank bond yields.**
Major banks now offer mixed-rate mortgages with upper bounds above 6%, a level unseen in nearly two years, while lower bounds have returned to the mid-4% range after about a year. Credit loan rates for prime borrowers have also risen in line with one-year bond yields, pushing up overall borrowing costs.
**A Bank of Korea report released on November 30, 2024, shows the household debt-to-GDP ratio jumped 13.8 percentage points from 2014 to 2024, the third-largest increase among 77 IMF-surveyed countries after China and Hong Kong.**
BIS data indicate the debt service ratio climbed 1.6 percentage points from Q1 2014 to Q1 2025—the second-highest global rise after Norway—reflecting substantially higher principal and interest burdens on households.
**Despite this debt surge, private consumption’s share of GDP fell by 1.3 percentage points over the past decade, a divergence from peer countries with similar debt trajectories.**
The BOK estimates that excessive household credit growth since 2013 has reduced annual private consumption growth by about 0.40 to 0.44 percentage points. If household debt had remained at 2012 levels, private consumption in 2024 would be 4.9–5.4% higher, boosting its GDP share from 48.5% to roughly 50.9%.
**South Korean consumers exhibit a notably weak wealth effect from real estate: a 1% rise in property prices spurs only a 0.02% increase in consumption, compared with 0.03–0.23% in other advanced economies.**
Contributing factors include the absence of housing liquidity products such as reverse mortgages, cultural norms treating home equity as reserved for future housing needs, and rising vacancy rates in non-residential real estate.
**The BOK describes household debt’s impact on consumption as a gradual, chronic contraction—akin to arteriosclerosis—rather than a sudden crisis, although it notes some recent declines in the debt-to-GDP ratio.**
Demographic shifts have also weighed on consumption growth, subtracting 0.8 percentage points over the decade, while debt accumulation shaved off about 0.4 percentage points annually. The report warns that heavy debt service obligations will likely continue to constrain private consumption over the long term.
South Korean Corporate Dollar Holdings Reach Record High Amid Won Depreciation
Dec. 1, 2025 | Financial SystemCorporate deposits in US dollars at South Korea’s leading banks have climbed to unprecedented levels as the won weakens and exchange-rate uncertainty rises.
**Five major South Korean banks—Kookmin, Shinhan, Hana, Woori, and NongHyup—saw corporate dollar balances jump by roughly 21 percent in November, rising from $44.325 billion at the end of October to $53.744 billion by November 27, 2025.**
This increase marks the fastest monthly growth in corporate dollar holdings so far this year.
**Banks registered this surge against a backdrop of a sharply weakening won and forecasts that the won-dollar rate could top 1,500 won.**
In past episodes of dollar strength, investors often sold dollars to lock in exchange gains. This time, however, corporations have continued to build their dollar reserves, driven by expanding US investments and mounting exchange-rate uncertainty that leads firms to hold onto dollars in case the greenback’s strength endures.
**Retail investors have mirrored this trend, boosting their dollar deposit holdings for the fourth straight month.**
As of November 27, individual deposits reached $12.253 billion, with one bank reporting more than $3 billion in retail dollar balances—the highest since January 2022. Growing interest in overseas equities and expectations of further dollar gains have sustained this demand for foreign currency deposits among individuals.
Including public institutions, total dollar deposits at the five banks reached $67.01 billion by the end of November, an 18 percent increase from October and the largest monthly rise across all customer segments this year.
**The won’s value fell from about 1,390 won per dollar in early September to over 1,470 won by late November, despite government efforts to support the currency.**
Market observers point to ongoing volatility and no clear signs that the foreign exchange market will stabilize soon.
**To address the won’s rapid decline, the South Korean government and the National Pension Service met on November 24 to discuss measures for exchange-rate stabilization.**
While they did not announce any specific actions, the meeting reflects authorities’ deep concern over persistent currency fluctuations.
Monitored Intelligence for South Korea - Dec. 1, 2025
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Erudite Risk takes an all risks approach to intelligence reporting. We categorize key intelligence into one of 40 different risk intelligence categories.
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애플, 2027년부터 인텔에 ‘M칩’ 생산 맡긴다… 5년만의 재결합 [MOVIEW]
Apple to Entrust Intel with M Chip Production from 2027… Reunion After 5 Years [MOVIEW]
Digital Daily | Local Language | News | Dec. 1, 2025 | UndeterminedTech Development/Adoption
Apple plans to outsource the production of its entry-level M-series chips, likely the M6 or M7, to Intel starting in mid-2027. Unlike their previous relationship where Intel handled both design and production using x86 architecture, this new cooperation involves Apple designing ARM-based chips while Intel focuses solely on manufacturing using its advanced 18A process.
This shift is driven by U.S. government pressure to increase domestic semiconductor manufacturing and Apple's strategy to diversify its supply chain. Intel’s 18A process, a cutting-edge sub-2-nanometer technology, is capable of mass production in North America and aligns with U.S. initiatives to foster strategic semiconductor development. By partnering with Intel, Apple aims to mitigate risks associated with heavy reliance on TSMC, particularly concerns over geopolitical tensions in Taiwan and supply disruption vulnerabilities.
The volume of chips Intel is expected to produce is estimated at 15 to 20 million units annually, primarily for devices like the MacBook Air and iPads, which is not large enough to significantly impact TSMC's dominance but holds important symbolic value. Apple has shown confidence in Intel's foundry capabilities, especially due to innovations in Intel's 18A process such as PowerVia and Omni MIM capacitors. The announcement led to a more than 10% surge in Intel's stock, signaling market optimism about the revival of Intel's foundry business.
Despite this new collaboration, Apple will continue to rely mostly on TSMC for its high-performance M-series and A-series chips. The move marks the beginning of a transition from a single-foundry system to a dual-foundry approach involving both TSMC and Intel, potentially reshaping the global semiconductor market and influencing supply chain strategies industry-wide.
치솟은 환율에 韓 '달러 GDP' 올해 뒷걸음질
Soaring Exchange Rate Causes South Korea's Dollar GDP to Decline This Year
Hankyung | Local Language | News | Dec. 1, 2025 | UndeterminedEconomic Growth
South Korea's gross domestic product (GDP) converted into U.S. dollars is projected to contract by 0.9% this year, falling from $1.8754 trillion last year to an estimated $1.8586 trillion, according to the International Monetary Fund (IMF). This decrease is primarily due to the won–dollar exchange rate rising sharply, which has outweighed nominal GDP growth in won terms. Over the past two years, dollar GDP has essentially stagnated, increasing only 0.7% from $1.8448 trillion in 2023.
In local currency terms, nominal GDP is expected to grow by 2.1%, driven by real economic growth of 0.9% after adjusting for price factors. The average won-dollar exchange rate from January to November 2025 was 1,418 won per dollar, up 4% from 1,364 won the previous year. With the exchange rate nearing 1,500 won, the annual average might rise further by the year-end, exerting downward pressure on dollar GDP figures.
The exchange rate is becoming a critical factor for South Korea's economic metrics and targets, potentially delaying milestones such as reaching $2 trillion in GDP and attaining a per-capita GDP of $40,000, which were expected within the next few years. The won's depreciation is influenced by interest-rate differences with the U.S., excess market liquidity, and the weakening Japanese yen. On the supply side, foreign investments by Korean individual investors ("Seohak ants"), the National Pension Service's overseas investments, and exporters delaying dollar conversions are contributing to the higher exchange rate, which appears to be beyond the control of policy authorities.
"6.5초마다 에어컨 한 대씩"…中 샤오미, 전기차 이어 가전까지 '제조 독립'
One Air Conditioner Every 6.5 Seconds... China's Xiaomi Achieves 'Manufacturing Independence' from Electric Cars to Home Appliances
Digital Daily | Local Language | News | Dec. 1, 2025 | UndeterminedTech Development/Adoption
Xiaomi has announced the opening of a new R&D building at its smart appliances factory in Wuhan, marking a significant step toward manufacturing independence. The facility consolidates technology development, manufacturing, and verification with around 300 engineers working in one space. This development completes Xiaomi's "Human x Car x Home" ecosystem, integrating its smartphone, electric vehicle, and home appliance businesses.
The Wuhan smart factory, operational since October and equipped with the self-developed Fengpai Smart Manufacturing Platform and AI vision inspection system, can produce one premium air conditioner every 6.5 seconds. Core components are subjected to 100% precision inspection, highlighting the factory's high throughput and automation level. Xiaomi plans to shift major white goods production, including air conditioners, refrigerators, and washing machines, to a fully in-house design and manufacturing system, moving away from outsourced production and badge engineering.
By achieving manufacturing capabilities across smartphones, electric vehicles, and home appliances, Xiaomi has created a hardware triangle and is advancing smart home and IoT strategies to provide integrated connectivity across its products. This expansion and ecosystem strengthening are anticipated to challenge established Korean firms like Samsung Electronics and LG Electronics, potentially reshaping the competitive dynamics of the global smart home market.
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