Lower interest rates for 2 consecutive months...How will it affect our economy?

■ Host: Um Min Anchor
■ Telephone connection: Lee In-cheol, director of the Good Economic Research Institute

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information. Please specify [YTN Newswide] when quoting.


[Anchor]
Last Thursday, the Bank of Korea unexpectedly cut its key interest rate for the second consecutive time. There was an explanation that it was inevitable as the internal and external economic situation was difficult. Let's see how far the impact of the rate cut will be. Lee In-cheol, director of the Good Economic Research Institute, is connected. Hello. South Korea has cut its benchmark interest rate for two consecutive months. There is an unusual evaluation in the market, so why did the Bank of Korea make this decision?

[Lee In-cheol]
There is no business ahead of the economic slowdown. Earlier, eight to nine out of 10 bond experts overwhelmingly expected the outlook for a rate freeze this month because of the high exchange rate. When I opened the lid, four out of six members of the Monetary Policy Committee agreed to the reduction. Now, the base rate has decreased by 0.25 percentage points to 3% per year. This widened the benchmark interest rate gap between South Korea and the United States by 1.75 percentage points again. There are two main reasons why the Bank of Korea made such a surprise rate cut. First of all, the slump in domestic consumption is serious, with sluggish consumption continuing for two years. In fact, the Korean economy grew by 1.3% in the first quarter of this year, but it grew by minus 0.2% in the second quarter. In the third quarter, it only grew 0.1% and virtually zero. In particular, exports, which have supported the Korean economy, have been slowing down since the peak of the second quarter. Exports fell -0.4% in the third quarter compared to the previous quarter, rather. In addition, uncertainty about the Korean economy has increased as the Trump risk has been reflected. In short, the Bank of Korea has decided that the possibility of a recession is much more serious than a high exchange rate, household debt and rising house prices, so it is the first time in 15 years that it has cut its key interest rate for two consecutive months since 2009.

[Anchor]
You said there was no business in the economic slowdown, but I wonder how the interest rate cut for two consecutive months will affect our economy. First of all, the Bank of Korea said it was to stimulate the economy, but would it work here?

[Lee In-cheol]
First of all, the most frequently asked question at the press conference was how effective it was to boost the economy by 0.5% for the second consecutive month, and he said it has the effect of driving GDP and economic growth by 0.14 percentage points. The most important thing is how much my loan interest rate will fall, and of course, although it is reflected with a time difference, the burden of household interest will be reduced to around 6 trillion won per year and an average of 300,000 won per person. In fact, the most important thing was how it would affect the real estate market. The impact of a rate cut on the property market in the short term is quite limited. However, the Bank of Korea has hinted at further rate cuts. Considering the unstable factors in supply and demand in Seoul and the metropolitan area, it can be an unstable factor in the mid to long term. In fact, house prices across the country have been falling for two consecutive weeks. Seoul is also slowing down. Amid a sharp drop in transactions amid high-intensity loan regulations, only sales are stagnating.

In fact, the trading volume of apartments in Seoul last month is counted as 4,000 households. Compared to 8,000 and 9,500 households in July and August this year, the volume has halved. It's also called unsold after completion. The so-called malicious unsold sales are increasing. Since August, the number of unsold households since completion has exceeded 8,000, increasing by more than 1,000 in a month. It is also characteristic that the number of such malicious unsold houses is increasing mainly in the metropolitan area such as Incheon. Thus, the Bank of Korea has cut its key interest rate to prevent a recession, but it is likely to be difficult to buy a house by taking out debt amid tightened lending regulations by financial authorities. Nevertheless, the Bank of Korea has hinted at the possibility of further rate cuts, which are likely to be gradually reflected in lending rates. While the supply of apartments such as Seoul is expected to decrease over the next two to three years, we cannot rule out the possibility that additional interest rate cuts will spark household debt and rising housing prices, which have been dormant in the mid to long term.

[Anchor]
In this situation, half of the domestic real estate owned by foreigners were found to be owned by Chinese. But I heard that the proportion of Chinese holdings is increasing, so where is the background?

[Lee In-cheol]
It turns out that more than half of the homes owned by foreigners in Korea are Chinese. As of the end of June this year, the Ministry of Land, Infrastructure and Transport had 9,058 foreign-owned homes. Compared to six months ago, there were 3.9% and 3,600 more households, with 0.49% of all homes owned by foreigners and 72.8% of homes owned by foreigners concentrated in the Seoul metropolitan area. By country, out of a total of 93,400 foreigners who owned domestic homes, 52,700 were Chinese, or 55.5%. The number of Chinese-owned homes has increased by more than 2,400 in six months. In the first half of this year, the Chinese bought about 70% of all foreign-owned houses. After Chinese, Americans, Canada, Taiwan, and Australia were the most common. When you look at the land ownership of foreigners, the area of ownership was the most owned by Americans and the second most owned by Chinese.

The problem is the mutualism controversy. Korea allows foreigners relatively freely when purchasing real estate. Related regulations have been relaxed compared to other countries. China, on the other hand, strictly restricts foreign ownership of land. It operates mutually disproportionate regulations. In particular, the Chinese are intensively purchasing apartments in Seoul and the metropolitan area. This is a factor that increases real estate prices, polarization, and deepening the wealth gap between classes. Therefore, it has been steadily pointed out that Korea also needs appropriate investment regulations based on reciprocity.

[Anchor]
And the Democratic Party of Korea recently took out a card on the revision of the commercial law, and Chairman Lee Jae-myung also expressed his willingness to push for the revision of the commercial law within this regular session of the National Assembly. However, there are concerns in the business community to the extent that even some even say that it was listed for no reason. What's the reason for the amendment?

[Lee In-cheol]
According to Article 382 (3) of the current Korean Commercial Act, this issue stipulates that the company must faithfully perform its duties for the benefit of the company. In addition, the amendment to the commercial law promoted by the Democratic Party is to include the duty of directors to be faithful to the existing company to include plus shareholders. In fact, it has been possible to attempt to damage minority shareholders unilaterally, such as LG Chem's physical division, Doosan Group's merger of subsidiaries, and Korea Zinc's paid-in capital increase, because the board of directors has been faithful to the interests of the company and major shareholders. Therefore, it is intended to hold not only the company but also the directors who make decisions that undermine shareholder value in the future. On top of that, the business community is protesting for three reasons. If the Commercial Act is revised, it raises the possibility of being abused as a means of attacking management rights of overseas speculative capital.

In addition, individual shareholders may also have a greater risk of litigation against board members, citing the reason that this could undermine the growth engine, which would often lead to dividends rather than finding or investing in new businesses. The government and the ruling party, which have been waiting and watching, are actually opposing. Kim Byung-hwan, chairman of the Financial Services Commission, is supporting companies by saying that foreign speculative capital will make excessive demands on companies or threaten their management rights under the pretext of the amendment to the commercial law, and that their corporate value could be damaged in the process of wasting their resources to respond. It is a position that governance issues, such as mergers and acquisitions and physical division, that have been problematic, are possible by tweaking the Capital Market Act, not by amendment to the Commercial Act. However, in order to fundamentally prevent abuse of management control in the stock market, Lee Jae-myung, chairman of the Democratic Party of Korea, said that the National Assembly will definitely revise the commercial law to include shareholders, so the Democratic Party of Korea has turned to individual investors' opposition to the financial investment, but the commercial law amendment is likely to take a strong drive.

[Anchor]
And Samsung Electronics recently carried out large-scale executive personnel appointments. Looking at the list, a large number of executives in their 30s and 40s were selected. At the same time, he also expressed his ambition to expand the candidate group for future managers through bold selection, so will this lead to results?

[Lee In-cheol]
On the first day, Samsung Electronics' personnel appointment was a personnel appointment from the presidents. On the second day, the vice president and executive-level personnel appointments were conducted. First of all, the number of presidents was two, seven, seven, and nine, so the number of regular presidents was the smallest since last year. The semiconductor sector, which has been sluggish recently, has replaced the memory division and the foundry division head. Han Jung-hee and Han Jung-hee were co-representatives in charge of the former CEO, and a two-person system was established. The TF vice chairman of the business division, which has attracted the most attention so far, is actually the second-largest in the possibility of special bonds, was eventually suspended. For this reason, some pointed out that they expected a human renewal but ended up maintaining the status quo. The second day's greetings are being evaluated as quite unconventional. A total of 137 executive personnel below the vice president level, including vice president, managing director, and technical research positions. Excluding 2017, when he temporarily moved due to the influence of the state affairs manipulation incident, it is probably the smallest since the end of 2015, but if you look at it by field, the progress of artificial intelligence and engineers is remarkable.

In addition, the trend of generational change continued this year, with the appointment of managing directors in their 30s and vice presidents in their 40s. However, changes in human renewal or leadership can have a short-term impact. After all, the key to the problem is the recovery of technology. Samsung Electronics is falling behind as a latecomer in the race function semiconductor market. Securing competitiveness in the AI business is emerging as Samsung Electronics' biggest challenge in the future by developing technology and strengthening product competitiveness.

[Anchor]
I'll also talk about food prices. Until now, I wondered if cabbage prices were stabilizing, but recently, cabbage prices have been rising again due to heavy snow. There are such effects due to abnormal weather conditions, so how is the recent price trend of shopping cart?

[Lee In-cheol]
Cabbage prices soared at the end of November due to record heavy snow. As of the 27th, a 10-kg cabbage net is traded at over 10,000 won at Seoul Garak Market, the largest agricultural wholesale market in the country. It jumped 38.6% in one day. On the 28th, it jumped to 13,569 won, but the distribution industry believes that the price of cabbage has soared due to the lack of supply due to heavy snow in some mountainous areas or difficulties in transportation this year. The wholesale price of radish, a kimchi ingredient, also soared 56% in a week due to heavy snow. Of course, the rise in wholesale agricultural prices has not yet been reflected in retail prices. As of the 29th of the Korea Agro-Fisheries & Food Trade Corporation, the average retail price per head of cabbage was 3,234 won nationwide, about 7% higher than a week ago, and 2,834 won per dance, up 6.7% over the same period. The aftermath of the heavy snow's shipment disruptions has not yet led to an increase in retail prices. However, in the industry, if this heavy snow is prolonged, it is likely to affect agricultural prices. Fortunately, however, since the main production areas where cabbages are currently being shipped are Jeonnam, Gyeongnam, and southern regions, the southern regions have been relatively less affected by heavy snow, so it is expected that the price of cabbages will be affected by how long the heavy snow lasts in the future.

[Anchor]
Let's stop here. I took a look at economic issues with Lee In-cheol, director of the Good Economic Research Institute. Thank you.