A Study on the Impact of Hallyu (Korean Wave) on Korea’s Consumer Goods Exports to China: Panel Analysis Using Big Data and Provincial-Level Data

Abstract

This study empirically analyzes how the Hallyu (Korean Wave) phenomenon affects Korea’s consumer goods exports to China using Chinese provincial-level panel data covering the period from 2011 to 2020. This paper adopts Baidu Index big data with the keywords “Korean drama”, “Korean movie”, “Korean music”, and “Korean entertainment” as proxy variables for Hallyu. The paper investigates the impact of Hallyu on Korean consumer goods exports by subdividing consumer goods into seven processing steps. In addition to the effect of the composite Hallyu index, the effect of each Hallyu content is also examined. Moreover, this study also investigates the impact of the political issue of the deployment of the THAAD American anti-ballistic missile defense system by dividing the period from 2011 to 2020 into before and after 2016. An export equation that includes income level, the Hallyu index, as well as other variables recognized as factors affecting Korea’s exports in existing studies, is used. Several interesting conclusions have been reached. First, Hallyu in China has a significant impact on Korea’s exports of non-durable consumer goods and processed household food and beverages to China. Second, the political issue of the deployment of THAAD has a negative impact on Korea’s exports of consumer goods to China. Third, among the four types of Hallyu content, dramas, as the most popular content in China, have the greatest influence on Korea’s exports of consumer goods to China.

1. Introduction

Hallyu (Korean Wave) refers to a sociocultural phenomenon in which Korean popular culture is popular abroad and affects people’s lifestyles. The Korean Wave started to form in Asia, including China, in the 1990s. In 1993, the TV drama Jealousy was first exported to China. From 1997, dramas such as What is Love became popular and the Korean Wave led by TV dramas began.

In the 2010s, the central axis of the Korean Wave shifted to popular music centered on idol groups such as TVXQ, Wonder Girls, and BTS, as well as singers such as Psy, who gained great popularity abroad. In this way, the K-pop boom that opened the second round of Hallyu is also called “New Hallyu”. One of the main characteristics of New Hallyu is that the content is diversified into not only dramas, movies, and music, but also entertainment, games, and Hangeul. The regional scope of Hallyu is also expanding beyond Asia to Central and South America, North America, the Middle East, and Europe. In addition, the New Hallyu is creating ripple effects, as it is combined with other industries as well as the cultural industry. The number of foreign tourists visiting South Korea is increasing and it has a positive effect on the sales of South Korean products.

As the ripple effects of Hallyu became visible, studies on the relationship between Hallyu and South Korean product sales were actively conducted in South Korean academic circles. In these studies, research has mainly focused on China, the origin of Hallyu and South Korea’s largest exporter. On the other hand, most of the existing research on Hallyu was based on surveys targeting Chinese consumers. These questionnaire items were generally based on whether Chinese consumers like South Korean cultural content, whether they recognize South Korean product brands or like South Korean products because of South Korean cultural content, whether they actually increased their consumption of South Korean products, how satisfied they were with South Korean products, whether the image of the country or the image of South Korean products has been improved, etc. In addition, due to the limitations of the surveys, there have been only several hundred surveys, and in many cases, they were limited to a specific province or city. Furthermore, in terms of demographic characteristics, they mainly targeted women, college students, and office workers, and in terms of industry, they were often limited to specific industries such as cosmetics and fashion [1,2,3,4,5].

However, there was a problem with the analysis of the survey methods used in the preceding studies in that it is difficult to obtain sufficient information about the Korean Wave of Chinese consumers due to the limitations of the surveys [6]. In other words, it is problematic to evaluate 1.4 billion Chinese consumers in 31 provinces, municipalities, and autonomous regions with hundreds of samples limited to specific cities or population characteristics. In addition, there is also the problem that it is difficult to filter out false answers from an online survey, which has been selected in many studies.

Following several previous studies [6,7], this study uses data extracted from big data, not a survey method, as a proxy variable for Hallyu, and empirically analyzes the impact of Hallyu on South Korea’s exports of consumer goods to China. To be more specific, this paper examines the effect of Hallyu on South Korea’s exports of consumer goods to China using regional Hallyu statistics extracted from the Baidu Index. This study also tries to identify the relationship between Hallyu and exports of consumer goods by the processing stage. For this purpose, HS six-digit-level trade data between South Korea and China’s 31 provinces provided by the Korea International Trade Association were used, and the HS six-digit-level data were classified based on the UN classification by Broad Economic Categories (BEC). The analysis period is from 2011 to 2020, which is when Hallyu entered the New Hallyu period. In this study, dramas, movies, music, and entertainment were used as types of Hallyu content, and the relationship between the Hallyu composite index and consumer goods exports was confirmed. We also tried to check the effects of each Hallyu content and consumer goods exports. In addition, in order to examine the impact of the political issue of the THAAD American anti-ballistic missile defense system, it was also analyzed by dividing the period into before and after the deployment of THAAD. The reason for looking at the impact of THAAD is that it cooled not only political relations between South Korea and China but also economic and social relations. As will be analyzed in Section 3, the political issue of the deployment of THAAD affected Chinese people’s consumption of Hallyu content.

This study is different from previous studies in several aspects. First, while existing studies on the Korean Wave in China were mainly based on surveys targeting Chinese consumers, this study measured the level of interest in Hallyu by adopting Baidu Index data and applied big data to the regression analysis. It is one of the few papers that is different from the existing survey-based studies. Second, while previous studies mainly selected three types of cultural content (dramas, movies, and music) as proxy variables for Hallyu, this study also added entertainment to reflect the fact that entertainment has emerged as the second most popular Hallyu content following dramas in China in the New Hallyu era. In addition, this study not only examined the effect of the Hallyu index combined with these four content categories but also the effects of each of the four. Third, unlike the existing studies on the Korean Wave in China, which are mainly limited to specific items such as cosmetics or fashion, this study targeted all consumer goods, which were further subdivided into seven processing steps: primary household food and beverages, processed household food and beverages, passenger motor cars, other non-industrial transport equipment, durable consumer goods, semi-durable consumer goods, and non-durable consumer goods, so that there is a clear distinction from previous studies. Fourth, this study is also different from existing studies in that it analyzed the entire period before and after 2016 to examine the impact of the political issue of THAAD deployment.

In addition to these differences from existing research, the significance of this study is that it aims to reveal that cultural content such as the Korean Wave has an important impact on trade and economic sustainability. The relationship between cultural content and sustainability appears in several aspects. First, the cultural content industry has a ripple effect on other industries such as consumer goods, fashion, cosmetics, and tourism, and is an energy-efficient service industry. The cultural content industry can have an impact that transcends time and space. In the case of the Korean Wave, K-pop and K-dramas are gaining global popularity beyond the region, and the reason why Chinese interest in Korean dramas has not decreased even after COVID-19 is because they are not limited by space. Third, positive images of cultural content such as K-pop or Korean dramas can alleviate political conflicts in the long run by enhancing mutual social and historical interest and understanding among the citizens of trading countries and lead to stable trade transactions and sustainable economic development between the two countries [8].

The structure of this study is as follows. Following the introduction, Section 2 reviews existing studies on the Korean Wave. Section 3 examines the phenomenon of Hallyu and South Korea’s exports of consumer goods to China. Section 4 presents the empirical analysis model and data. Then, in Section 5, the results of the empirical analysis are presented and discussed. Finally, Section 6 summarizes and draws conclusions.

2. Theoretical Background and Review of the Literature

The Korean Wave refers to a phenomenon in which Korean popular culture is gaining popularity overseas. “Korean Wave” is a new term that was first used in the Chinese media in the middle of 1999, and it became established in earnest when “韓流”, a homonym for “寒流”, meaning a fierce wind, began to be used. In the 1990s and 2000s, Korean dramas received great attention in Asia. In addition, Korean pop music also became popular in Asia thanks to overseas performances by HOT, Coolon, Fin. K.L., and BoA. In the 2010s, idol groups such as TVXQ, Big Bang, Girls’ Generation, and Wonder Girls, centered on K-pop, gained sensational popularity. This period can be considered the “New Korean Wave”. Entering the “New Korean Wave” period, the Korean Wave has expanded not only to K-pop and dramas but also to various fields such as movies, entertainment, games, food, fashion, tourism, and Hangul, and is emerging as a global phenomenon all over the world.

The development of Hallyu in China can be divided into several stages [9]. The first stage is the initial stage, the 1990s. In 1993, the year after the establishment of diplomatic relations between Korea and China, the Korean TV series Jealousy was broadcast in China for the first time, marking the beginning of Hallyu’s entry into the Chinese market. Although the drama did not gain much popularity in China, it was enough to create the impression that “Korean dramas are good” and laid a solid foundation for the subsequent advancement of Korean dramas into the Chinese market. In 1997, What Is Love was aired on China’s CCTV and recorded high viewership ratings, and the following year, A Star in My Heart was another hit, sparking a craze for Korean dramas throughout China. In the same year, HOT’s album release and performance gained explosive popularity in China, and the interest in Korea created by TV dramas led to Korean dance music, and the term Korean Wave began to be used in earnest [10]. The second stage is the development stage, the 2000s. In the 2000s, Korean dramas received attention again as dramas such as Autumn in My Heart, Winter Sonata, and Dae Jang Geum gained great popularity. At the same time, Korean pop music such as HOT’s album and movies such as My Sassy Girl were also very popular in China, and the influence of the Korean Wave in the Chinese market was gradually increasing. The third stage is the expansion stage, from 2011 to 2015, before the political issue of THAAD deployment. During this period, the scope of Korean cultural content greatly expanded to entertainment, food, fashion, etc., and Hallyu became increasingly popular among young people. During this period, Korean entertainment became particularly popular in China. Here, entertainment refers to a broadcast program that provides fun by combining amusement, music, etc. Starting with the Chinese version of Where Are We Going, Dad in 2013, Korean entertainment was exported to China [11]. In 2014 and 2015, about 20 Korean entertainment programs, including I Am a Singer, Running Man, We Got Married, and Real Men, were produced in collaboration with Chinese broadcasting stations [11]. The fourth stage is from 2016 to the present, a period of relative stagnation. After the THAAD dispute took place, a “Korea limitation order” was placed upon Hallyu. In China, Hallyu cultural events were canceled, Korean actors had to quit from their projects, and only a limited amount of Korean media could be exported to China [12]. Despite this, Hallyu is still an important cultural phenomenon in China and has had an important impact on the development of South Korea’s cultural industry and the shaping of the national image and the image of Korean products.

Existing research on the Korean Wave can be broadly divided into two categories. The first is research to identify the causes of the Korean Wave, which mainly includes early studies. In these studies, the causes of the Korean Wave are explained by the status of the Korean economy as a new development model in East Asia, active cultural exchange, and cultural proximity [13,14,15]. The second is research on the ripple effect of the Korean Wave, that is, research on whether the Korean Wave affects purchase intention or purchase behavior regarding Korean products. The Korean Wave has been analyzed as having a positive influence on the purchase of Korean products in many studies [1,2,3,4,5,16,17,18]. This is because people naturally came into contact with Korea, Korean products, and Korean brands through the Korean Wave, and were imprinted with a good image, which led to the purchase of Korean products [3]. These studies were conducted on specific consumer goods industries such as cosmetics, food, and fashion. In particular, there are many studies related to cosmetics, because the Korean Wave, centered on dramas, movies, and K-pop, is led by Korean Wave stars [19]. Meanwhile, the vast majority of studies were focused on China, which is the first and still the largest Korean Wave market. However, there have been some comparative studies conducted between China and Vietnam or studies targeting the global market [7,20,21,22].

Most of the existing studies on Hallyu were based on surveys targeting Chinese consumers. However, due to the limitations of the survey methods, these surveys had to be limited to some provinces or specific provinces rather than the whole of China, and demographically, they were limited to young people who are interested in the Korean Wave and not all age groups, resulting in only hundreds of people being surveyed. Therefore, there was a clear limitation in measuring the level of interest in Hallyu of many Chinese people in various regions with the survey methods. On the other hand, the web-based Hallyu keyword search method has a clear advantage over the existing survey methods in that it can measure and compare the level of interest in Hallyu of all age groups covering all regions of China.

There are several previous studies that analyzed the preference for or the impact of Hallyu using a web-based Hallyu keyword search method [6,7,23]. One of these studies empirically analyzed whether the Korean Wave affected Korean cosmetics exports by adopting the Google Trends query index with the keywords “Korean drama” as a proxy variable for cultural trade [7]. It is the first attempt to analyze the impact of the Korean Wave using big data. The empirical results using the gravity model reveal that the Korean Wave indeed leads to cosmetics exports to Asian countries but has a weak relation with cosmetics exported worldwide [7]. After that, another study also investigated the Google search volume for the keywords “Korean drama”, “Korean movie”, and “Korean music” in analyzing each country’s preference for Hallyu [23]. For China, where Google search is restricted, keyword searches were conducted using the Baidu Index [23]. Based on these two previous studies, another study analyzed whether Hallyu had a significant effect on Korea’s cosmetics exports to China by using provincial Hallyu data extracted from the Baidu Index [6]. The study set the variable “Kwave” as a simple sum by examining how many keywords such as “Korean drama”, “Korean movie”, and “Korean music” were searched for on Baidu in each province [6]. From the regression analysis using the gravity model, the study found that Korean cosmetics are exported to regions where the interest in Hallyu is higher [6].

Following these three previous studies, our study uses data extracted from big data, not a survey method, as a proxy variable for Hallyu. Then, it empirically analyzes whether China’s regional interest in Hallyu has a significant effect on Korea’s consumer goods exports to Chinese provinces. This study extracted the Hallyu variable using the Baidu trend search method. Searching for a specific target on the web indicates the consumer’s level of interest in the search target. In extracting Baidu Index Hallyu data, in addition to “Korean drama (韩剧)”, “Korean music (韩国音乐)”, and “Korean movie (韩国电影)”, which have been widely used in previous studies, “Korean entertainment (韩综)” was also added as a keyword. This is because, as will be analyzed in Section 3, Korean entertainment is the second most popular Hallyu content in China following Korean dramas.

3. Hallyu in China and Exports of Korea’s Consumer Goods to China

3.1. Characteristics of Hallyu Consumption in China

Since 2012, the Korean Foundation for International Cultural Exchange (KOFICE) has been analyzing the Korean Wave phenomenon in China and other countries around the world with the Overseas Hallyu Survey Results Report, an investigation report released almost every year. The main purpose of this report is to understand the current status of Hallyu by examining objective indicators that can compare the current status of Hallyu content consumption and the level of spread of Hallyu by country. This section examines the characteristics of the Korean Wave in China with the above report published by the KOFICE [23,24,25,26,27,28,29,30,31,32].

First of all, let us set the scope of Hallyu cultural content. The 2021 Overseas Hallyu Survey Results Report analyzes Hallyu cultural content by dividing them into 10 categories: dramas, beauty, entertainment, fashion, movies, games, music, animations, publications, and food. However, it can be controversial to classify beauty, fashion, and food as cultural content in a strict sense. For that reason, in analyzing the annual report of the KOFICE on the status of overseas Hallyu, only seven categories, namely dramas, entertainment, movies, music, games, animations, and publications, are considered Hallyu cultural contents and the remaining three are excluded from the analysis.

The first characteristic of the Hallyu phenomenon in China is that the consumption of Hallyu is centered on dramas and entertainment, especially dramas, and the most popular Hallyu content is also dramas. As a result of examining the consumption share of Korean cultural content among the amount of each content usage, dramas and entertainment have consistently ranked at the top from 2014 to 2020. In particular, the proportion of consumption of dramas was high, and it ranked first for three consecutive years from 2014 to 2016. In terms of the popularity of Hallyu cultural content, dramas ranked the highest out of the seven categories, except in 2020. In 2020, movies boasted the highest popularity, which seems to be a result of the popularity of Parasite, which swept four awards at the American Academy Awards that year.

Comparing the global Hallyu phenomenon with the Hallyu phenomenon in China, dramas are the most popular in China, followed by entertainment. On the other hand, in the global market, K-pop is the most popular, followed by movies. With regard to association with Korea, K-pop was the first to be associated with the global market, while in China, dramas were the first to be associated with it. The factors that made Korean dramas popular in China included “a well-structured and solid story”, “an indirect experience of Korean life and culture”, and “the actors’ attractive appearance” [32]. The most popular and preferred Korean dramas in China were Dae Jang Geum starring Lee Young-Ae and Ji Jin-Hee, which aired from 2003 to 2004, and My Love from the Star starring Jun Ji-Hyun and Kim Su-Hyun, which aired from 2013 to 2014.

The second characteristic of the Hallyu phenomenon in China is that access to Hallyu content was mainly achieved via TV in the past, but from 2017, access through online platforms overtook TV to rise to the top spot. First of all, as mentioned earlier, the consumption of Hallyu in China is centered on dramas and entertainment shows. In the case of Asian countries including China, official exports of dramas and entertainment are active, so you can watch Korean dramas and entertainment on local terrestrial and cable TVs. On the other hand, in regions such as the Americas and Europe, K-pop is the most popular and is mainly consumed through the Internet. In addition, even in the case of dramas and entertainment shows, consumption through the Internet is relatively higher than official exports in the Americas and Europe. However, if that is the case, then why did the consumption of Hallyu through internet platforms surpass TV in China around 2017? This has to do with the deployment of THAAD. Since the introduction of THAAD, political and economic relations as well as cultural relations between the two countries have cooled, and thus TV screenings of Korean dramas and entertainment shows were restricted in China [12]. On the other hand, when consuming Hallyu content, YouTube and Netflix are mainly used in the global market, whereas in China, local platforms such as iQiyi and Youku are mainly used.

Third, the political issue of the deployment of THAAD affected the consumption of Hallyu content. After THAAD was confirmed in Korea in July 2016, cultural exchanges almost stopped as relations between the two countries cooled. All K-pop performances scheduled to be held in China were canceled, and it has become difficult to find the most popular Korean programs on Chinese broadcasts [12,29]. The entry of Korean celebrities into China has also been canceled. The political issue of Korea’s deployment of THAAD has also somewhat affected the consumption of Hallyu content by Chinese people. In 2018, the percentage of respondents who said that this issue affects their consumption of Hallyu content was found to be 56.7% [29]. In addition, as we saw earlier, the introduction of THAAD also affected Chinese people’s access to Hallyu content, which led to an increase in access through online platforms. The cooling of economic and cultural relations between the two countries due to THAAD started to ease little by little as Korea and China began to restore relations after May 2017. Then, on 1 July 2020, the Korea Tourism Organization and the Trip.com Group, the largest travel company in China, announced that they would jointly promote Korean tourism products.

Fourth, interest in Korean cultural content declined in the global market due to COVID-19, but neither interest nor consumption was significantly affected in China. The decline in interest in Korean cultural content in the global market in 2020 is likely due to the fact that direct communication between fans and Hallyu stars, such as overseas performances and fan meetings, decreased due to COVID-19. In the case of K-pop, which can be seen as having great brand power in Korean cultural content, singers have mainly communicated directly through local TV program appearances, performances, and local fan meetings. However, due to the COVID-19 outbreak, almost no local visits were made, so there were not many events to maintain and raise interest in K-pop. Korean films were in a similar situation, with fewer premieres and local events. However, as mentioned earlier, unlike the global market, dramas and entertainment shows are the most popular Korean cultural content in China, and these two types of content are relatively less affected by direct communication between stars and fans compared to K-pop or movies. Therefore, COVID-19 did not lead to a decline in interest in Korean cultural content in China.

Fifth, in relation to the ripple effects of Hallyu, the higher the proportion of consumption of Korean cultural content, that is, the higher the level of users of Korean cultural content, the higher the experience rate of purchasing Korean products. This was the same for low-involvement products such as food, clothing, and cosmetics, or high-involvement products such as home appliances, automobiles, and mobile phones. Cosmetics showed the highest purchasing experience rate among low-involvement products, followed by food [32]. Among high-involvement products, home appliances had the highest purchase experience rate, followed by mobile phone purchases [32]. This fifth characteristic, that the ripple effect of Hallyu leads to the purchase of Korean products, was common not only in China but also in the global market.

3.2. Hallyu Trend by Province in China

In previous studies, it was not easy to analyze how Chinese consumers’ interest in Hallyu differed by province due to the limitations of the survey methods. This study analyzes the level of interest in Hallyu by province through big data. We adopt four keywords, “Korean drama”, “Korean entertainment”, “Korean movie”, and “Korean Music”, as proxy variables for Hallyu and investigate the number of searches for the four keywords in each province on Baidu. In analyzing the characteristics of Hallyu consumption in China in the previous subsection, seven types including dramas, entertainment, movies, music, games, animations, and publications were considered Hallyu cultural content. However, it is true that games, animations, and publications are less well-known than dramas, entertainment shows, movies, and music. Therefore, in this subsection and in Section 4, only four types of Korean cultural content, namely dramas, entertainment, movies, and music, are targeted.

First,

Table 1. Trends in Search Volume for Hallyu Content in China (Daily Average). (Unit: Case).

	Total	Drama	Movie	Music	Entertainment
2011	44,802	24,543	13,276	3490	3493
2012	38,752	20,134	10,857	3606	4155
2013	42,397	21,787	9569	4428	6613
2014	59,220	28,069	17,421	5655	8075
2015	67,614	28,964	23,786	5669	9195
2016	81,939	30,149	38,506	5334	7950
2017	114,452	28,103	69,229	4254	12,866
2018	90,545	29,923	45,045	3917	11,660
2019	95,809	25,513	57,647	3706	8943
2020	87,978	25,148	51,351	3945	7534

Source: Author’s calculation using Baidu Index data [33].

shows the annual trend in the number of Korean Wave searches for the four content categories in 31 provinces in China, showing how many Chinese people searched for Hallyu keywords on average per day. As shown in the table, the total number of searches stagnated until 2013 but increased rapidly from 2014, peaking in 2017 with a 40% increase compared to the previous year, even when Korea–China relations cooled. Although the political issue of the deployment of THAAD had an impact on Hallyu content consumption, Chinese searches for Hallyu increased.

Looking at the four Hallyu content categories, it can be seen that the proportion of searches for dramas gradually decreased while the proportion of searches for movies gradually increased. The proportion of searches for dramas, which accounted for more than 50% until 2013, continued to decrease and dropped to less than 30% in 2020. On the other hand, the proportion of searches for movies increased from less than 30% in 2011 to nearly 60% in 2020. In particular, the number of movie searches surged in 2017 thanks to the popularity of the film Train to Busan, starring Gong Yoo and Jung Yu-Mi. Train to Busan, which was released in Korea in the second half of 2016, was still selected as the most preferred Korean film in China in 2020. On the other hand, music had the lowest proportion among the four content categories. These results are consistent with the survey results of the KOFICE [23,26,27,28,29,30,31,32], which show that the characteristics of Chinese Hallyu consumption are high in dramas and low in K-pop. However, as mentioned earlier, in the Overseas Hallyu Survey Results Report, the content with the highest proportion of Hallyu consumption belonged to dramas, but in the Baidu Trend search results, movies were found to be the most searched content. Do these two results not contradict each other? The answer is no. In the Overseas Hallyu Survey Results Report, the question that examines the proportion of Korean cultural content consumption is precisely “What percentage do you think Korean content accounts for in your consumption of each of the following cultural contents over the past year?” [32]. As a result of the survey, dramas ranked first, meaning that Korean dramas accounted for a high proportion of the total amount of watched dramas. In other words, it means that the proportion of Korean dramas in the total amount of watched dramas is higher than the proportion of Korean movies in the total amount of watched movies, which is a different issue from search volume.

Figure 1, Figure 2, Figure 3 and Figure 4 show the number of searches for “Korean drama”, “Korean movie”, “Korean music”, and “Korean entertainment” by province, respectively. Guangdong showed the highest search volume, followed by other eastern coastal regions such as Zhejiang, Jiangsu, Shandong, Beijing, and Shanghai. These provinces or municipalities are economically developed regions and places where Korea’s exports to China are active. What is interesting is that, contrary to expectations, the influence of Hallyu did not appear particularly high in northeastern regions such as Jilin and Heilongjiang, where many Korean–Chinese people live and have similar sentiments as those in Korea. Among the three northeastern provinces, Liaoning, the only province in the coastal region, showed a high search volume, and inland regions such as Heilongjiang and especially Jilin, where the Yanbian Korean Autonomous Prefecture is located, remained at a moderate level. This means that the Korean Wave in China had an influence mainly in the northeastern region until the 1990s and early 2000s, but after the drama Dae Jang Geum was aired in China and became a hit, the Korean Wave had a wide influence throughout China. In particular, it has spread more in coastal areas where the economy has developed and is sensitive to trends. This is also related to the migration of young Korean–Chinese people to coastal regions. Since the establishment of diplomatic ties between Korea and China in 1992, as the entry of Korean companies into China has been active in coastal areas such as Shandong, Jiangsu, and Guangdong, young Korean–Chinese people have also migrated to the region to engage in economic activities.

3.3. Exports of Korean Consumer Goods to China

Economic exchanges between Korea and China began to grow closer after diplomatic ties were established in 1992. In particular, since China joined the WTO at the end of 2001 and became the world’s factory, their respective positions in foreign trade have been greatly improved. Since 2002, China has overtaken the United States as Korea’s No. 1 export country, and China’s imports from Korea have continued to increase, overtaking Japan and becoming China’s largest importer since 2013.

As shown in

Table 2. Korea’s Exports to China. (Unit: Billon Dollars, %).

	Korea’s Exports to China	China’s Share of Korea’s Total Exports	Korea’s Share of China’s Total Imports
2011	1342	24.2 (1)	9.3 (2)
2012	1343	24.5 (1)	9.2 (2)
2013	1459	26.1 (1)	9.2 (1)
2014	1453	25.4 (1)	9.7 (1)
2015	1371	26.0 (1)	10.9 (1)
2016	1244	25.1 (1)	10.4 (1)
2017	1421	24.8 (1)	9.9 (1)
2018	1621	26.8 (1)	9.7 (1)
2019	1362	25.1 (1)	8.4 (1)
2020	1326	25.9 (1)	8.5 (2)

Note: Ranks in parentheses. Source: Author’s calculation using K-Statistics data of the Korea International Trade Association [34].

, Korea’s exports to China have been stable at the level of USD 130 billion without significant ups and downs since the 2010s. China’s share of Korea’s total exports has not changed much from 25%, and it continues to rank first in Korea’s exports by country. Korea’s share of China’s imports peaked at 10.9% in 2015 and then declined slightly, reaching 8.5% in 2020. Korea maintained the top position in China’s import market share for seven consecutive years from 2013 to 2019 but fell to second place in 2020 behind Taiwan. It is presumed that political and global issues such as THAAD, U.S.–China trade friction, and COVID-19 were at work. In particular, this is largely related to the fact that semiconductor exports, which account for the largest proportion of Korea’s exports to China, have decreased significantly since COVID-19.

Looking at Korea’s exports to China by processing stage, it can be seen in

Table 3. Structure of Korea’s Exports to China in Terms of Processing Stage. (Unit: %).

	Primary Goods	Intermediate Goods	Capital Goods	Consumer Goods
2011	0.6	71.3	24.2	3.9
2012	0.6	72.4	23.7	3.2
2013	0.4	73.2	22.9	3.4
2014	0.4	74.6	21.2	3.8
2015	0.5	73.4	21.7	4.4
2016	0.4	73.9	20.0	5.6
2017	0.4	78.9	17.3	3.3
2018	0.4	79.5	16.6	3.4
2019	0.5	79.4	15.6	4.4
2020	0.5	79.8	14.3	5.3

Source: Author’s calculation using K-Statistics data of the Korea International Trade Association [34].

that it has an export structure centered on intermediate goods. This type of goods, which account for an absolute proportion of Korea’s exports to China, continued to increase in share even in the 2010s, reaching 80% by 2020. On the other hand, the share of capital goods, which account for the second largest proportion after intermediate goods, continued to decline. Meanwhile, the share of consumer goods in Korea’s exports to China is still small at 5% but is gradually increasing.

In summary, Korea’s share of China’s import market has been decreasing since 2016, and the structure of Korea’s exports to China is still focused on intermediate goods. The proportion of consumer goods is slowly increasing but is still insignificant. Since the global financial crisis in 2008, China has been implementing a domestic demand-oriented and industrial sophistication growth policy to reduce external dependence. The decline of Korea in China’s import market share means that the structure of Korea’s exports to China has not yet adequately responded to China’s changing growth paradigm and import structure. Therefore, how to enter the expanding Chinese consumer goods market is an important question for Korea, and the role of Hallyu is also important in this process.

Next, if we look at Korea’s exports of consumer goods to China in more detail by processing step, as shown in

Table 4. Structure of Korea’s Consumer Goods Exports to China by Processing Step. (Unit: %).

	Primary Household Food and Beverages	Processed Household Food and Beverages	Passenger Motor Cars	Other Non-Industrial Transport Equipment	Durable Consumer Goods	Semi-Durable Consumer Goods	Non-Durable Consumer Goods
2011	3.6	9.5	57.2	0.0	3.7	16.4	9.6
2012	2.4	11.4	44.3	0.1	4.9	22.2	14.6
2013	3.3	12.2	44.1	0.0	6.7	18.3	15.5
2014	2.2	12.5	40.7	0.0	10.3	16.2	18.1
2015	1.9	14.5	24.4	0.0	9.5	17.7	32.0
2016	2.8	19.7	3.1	0.0	9.5	18.0	46.9
2017	1.6	17.4	1.2	0.0	7.4	17.2	55.2
2018	1.1	15.2	0.3	0.0	5.0	14.6	63.7
2019	1.2	15.1	0.0	0.0	4.6	13.0	66.1
2020	0.8	14.6	0.2	0.0	4.0	17.8	62.8

Source: Author’s calculation using K-Statistics data of the Korea International Trade Association [34].

, non-durable consumer goods accounted for the largest proportion as of 2020, followed by semi-durable consumer goods and processed household food and beverages. Looking at the time series, non-durable consumer goods accounted for less than 10% in 2011 but the proportion continued to rise, taking up an absolute share of more than 60% in 2020. On the other hand, the proportion of passenger motor cars was absolute in 2011 (57.2%) but has continued to decline since then. In particular, it has fallen sharply since 2016, and as of 2020, it is only 0.2%.

There are several reasons for the rapid decline in the share of passenger cars in Korea’s consumer goods exports to China, but the biggest reason is the impact of THAAD. The deterioration of bilateral relations between Korea and China following the deployment of THAAD has had the greatest impact on Korea in the consumer goods sector, particularly the automobile sector. This is well explained by the fact that not only have Korea’s automobile exports to China decreased, local sales of Korean automakers that invested in China in the early 2000s have also been plummeting since 2017. Although bilateral relations have improved since the Korea–China summit in 2019, sales of Korean cars in China have not recovered, as Japanese cars have filled the void in the meantime. While Korean cars are struggling in China, Japanese cars have attracted attention due to the recognition of their high-quality hybrid models produced in China and the eco-friendly drive of the Chinese government. In the case of processed household food and beverage products and durable consumer goods, the proportion increased until the mid-2010s, and then gradually decreased. The proportion of primary household food and beverages also decreased during the period from 2011 to 2020. Semi-durable consumer goods showed no significant ups and downs at about 15%, and other non-industrial transport equipment was hardly exported.

Finally, regarding Korea’s exports of consumer goods to China by province, as can be seen in Figure 5, exports to Shanghai accounted for the largest share with a quarter of the total as of 2020, followed by other eastern coastal regions such as Shandong, Zhejiang, Guangdong, and Beijing. Overall, Korea’s consumer goods exports to China are concentrated in the coastal regions. In the central and western regions, Henan, Hunan, Hubei, Shaanxi, and Chongqing showed relatively high shares compared to other central and western provinces.

Meanwhile, looking at the time series, consumer goods exports to Beijing were absolute in the early 2010s, accounting for about 50%, but declined rapidly after that, while other coastal provinces such as Guangdong, Shanghai, and Zhejiang continued to increase their proportion. Moreover, in 2011, exports of consumer goods to central and western regions such as Henan, Hunan, Hubei, Shaanxi, and Chongqing were almost nonexistent (refer to Figure 6), but their proportion gradually increased. This means that China’s consumer goods market is expanding and diversifying regionally as well. In addition, the increase in the proportion of exports to inland central and western regions is also related to China’s aforementioned domestic demand-oriented growth policy. Korean conglomerates such as Samsung Electronics, SK Hynix, and Hyundai Motors all expanded their production bases to the central and western regions in the 2010s, and these investments led to an increase in exports to these regions.

4. Materials and Methods

The purpose of this study is to identify the relationship between Hallyu and Korean consumer goods exports to Chinese provinces. According to the standard export equation in macroeconomics, exports are determined by the income of the importing country and the exchange rate, which is the relative price. Existing previous studies also consider export equations that include income-related variables of the importing country and exchange rate variables as relative prices. In addition, despite some limitations of the model, many studies use the gravity model to analyze the determinants of Korea’s exports [6,7,22,35,36,37,38]. This is because it clearly shows that trade is affected by distance and is therefore widely used in international trade. However, setting aside its limitations, the gravity model is not used in this study for the following two reasons. First, when using this model, the variable must use a uniform unit. This study analyzes the determinants of Korea’s exports to China by region. Because China’s regions are made up of 31 provinces, municipalities, and autonomous regions, variables at the regional level are not at the same level. Second, since the physical distance variable is constant regardless of time, it disappears from the fixed effects model analysis results.

Therefore, in this study, we use an export equation that includes income level. The standard export equation includes the income level of the importing country and the exchange rate variable, which is the relative price. However, in the case of this study, which analyzes the determinants of Korea’s exports to China by region, the exchange rate variable is the same for each region, so it is automatically excluded from the model, We also added the Hallyu index, a variable of our interest, to the empirical analysis model. In addition, variables recognized as factors affecting Korea’s exports in the existing studies are used as control variables. The empirical analysis model used in this study is as follows.

$$\begin{array}{ll}\ln \left(\mathrm{E}\mathrm{X}\right)=\mathsf{\alpha }+{\mathsf{\beta }}_1& \ln \left(\mathrm{P}\mathrm{G}\mathrm{D}\mathrm{P}\right)\\ & +{\mathsf{\beta }}_2\ln \left(\mathrm{G}\mathrm{D}\mathrm{P}\mathrm{G}\mathrm{R}\right)+{\mathsf{\beta }}_3\ln \left(\mathrm{RCON}\right)+{\mathsf{\beta }}_4\ln \left(\mathrm{W}\mathrm{F}\mathrm{D}\mathrm{I}\right)+{\mathsf{\beta }}_5\ln \left(\mathrm{K}\mathrm{F}\mathrm{D}\mathrm{I}\right)+{\mathsf{\beta }}_6\mathrm{D}\mathrm{U}\mathrm{M}\mathrm{M}\mathrm{Y}+{\mathsf{\beta }}_7\ln \left(\mathrm{K}\mathrm{W}\mathrm{A}\mathrm{V}\mathrm{E}\right)\end{array}$$

(1)

Here, EX is the dependent variable for Korea’s exports of consumer goods to Chinese provinces. While confirming the impact of the Korean Wave on overall consumer goods exports, consumer goods were also analyzed by subdividing them into seven processing steps: primary household food and beverages, processed household food and beverages, passenger motor cars, other non-industrial transport equipment, durable consumer goods, semi-durable consumer goods, and non-durable consumer goods. For this purpose, HS six-digit-level trade data between Korea and Chinese provinces provided by the Korea International Trade Association was used, and the data were classified based on the UN classification by Broad Economic Categories. PGDP, a variable that indicates income level, is China’s provincial per capita GDP. GDPGR represents China’s provincial economic growth rate. According to an existing study, the faster the growth of the EU, the more positive the impact it has on Korean exports to the EU [28]. RCON is a variable that represents market size and is measured as the total retail sales of consumer goods of each province. According to previous studies, the market size of the importing region is a factor that increases Korea’s exports to that region [35,37,39,40]. WFDI is the amount of direct investment from the world in each province of China and can be viewed as a variable indicating the degree of openness to the outside world. KFDI is the amount of direct investment each province of China attracts from Korea. In other words, it is the amount of investment made by Korean companies in each province of China. The effect of FDI on the exports of the investing country is revealed through the export creation effect and the export substitution effect [41,42,43]. The relationship between FDI and exports has been the subject of interest in many studies analyzing the determinants of Korea’s exports, and the results have all shown that there is a directly proportional relationship between investment and exports [35,36,37,40,44]. DUMMY is a coastal area dummy variable. Coastal areas with ports will be more advantageous for Korea’s exports to China. Previous studies have also confirmed that Korea’s exports to China are greater in coastal areas than in non-coastal areas [35,37].

Lastly, KWAVE is a variable that indicates the preference for Hallyu in each province. As described in Section 2, the Korean Wave has been analyzed as having a positive influence on the purchase of Korean products in many studies [1,2,3,4,5,6,7,16,17,18,20,21,22]. This is because people naturally came into contact with Korea, Korean products, and Korean brands through the Korean Wave, and were imprinted with a good image, which led to the purchase of Korean products [3]. In this study, a variable called “KWAVE” was set as a simple sum of Baidu search volumes for the four keywords “Korean drama (韩剧)”, “Korean music (韩国音乐)”, “Korean movie (韩国电影)”, and “Korean entertainment (韩综)”. Then, the relationship between the “KWAVE” composite index and exports of consumer goods was analyzed. In addition, the relationship between each Hallyu content and consumer goods exports was analyzed to examine which of the four Hallyu content categories affects the export of consumer goods. In addition, in order to examine the impact of the political issue of THAAD, an analysis was performed by dividing the whole period into two sub-periods: before (2011–2015) and after (2016–2020) THAAD.

Let us predict the results of the regression analysis in advance. ln(PGDP) is a variable representing the income level, and it can be assumed that the result of the regression analysis will be a positive number. The higher the GDP per capita in a province, the higher Korea’s exports to that province will be. ln(GDPGR) is the economic growth rate of each province of China and is also expected to be a positive number. This is because the faster the economic growth rate in a region, the greater the demand for Korean products. ln(RCON) is a variable indicating the market size and is also expected to be a positive number. This is because the larger the consumption scale, the greater the consumption of Korean products. ln(WFDI) is a variable representing openness and indicates how much FDI each Chinese province attracts from the world. It can be predicted that the more foreign investment comes in and the more open the region, the higher the awareness and preference for foreign products, and thus the demand for Korean products will also increase. ln(KFDI) is a variable indicating Korea’s direct investment in each province of China. As mentioned above, the effect of FDI on the exports of the investing country is revealed through the export creation effect and the export substitution effect. If the export creation effect is greater than the export substitution effect, the analysis result will be a positive number, and in the opposite case, it will be a negative sign. DUMMY is a variable indicating whether it is a coastal area and is expected to be a positive number. Not only does having a port shorten the logistics distance, but most coastal areas have high income levels. Lastly, ln(KWAVE) is a variable representing the Korean Wave. If Korea’s consumer goods exports increase in regions with higher interest in the Korean Wave, it will appear as a positive sign. The definitions and expected signs of the variables included in the empirical analysis model are presented in

Table 5. Variable Definitions, Data Sources, and Expected Signs.

Variable	Definition	Source	Expected Sign
Dependent variables
ln(EX)	Log value of Korea’s consumer goods exports	[34]
ln(EX1)	Log value of Korea’s primary household food and beverage exports	[34]
ln(EX2)	Log value of Korea’s processed household food and beverage exports	[34]
ln(EX3)	Log value of Korea’s passenger motor car exports	[34]
ln(EX4)	Log value of Korea’s other non-industrial transport equipment exports	[34]
ln(EX5)	Log value of Korea’s durable consumer goods exports	[34]
ln(EX6)	Log value of Korea’s semi-durable consumer goods exports	[34]
ln(EX7)	Log value of Korea’s non-durable consumer goods exports	[34]
Independent variables:
Hallyu variables
ln(Kwave)	Log value of the sum of searches for ‘Korean drama’, ‘Korean movie’, ‘Korean music’, and ‘Korean entertainment’	[33]	+
ln(Kdrama)	Log value of the number of ‘Korean drama’ searches	[33]	+
ln(Kmovie)	Log value of the number of ‘Korean movie’ searches	[33]	+
Ln(Kmusic)	Log value of the number of ‘Korean music’ searches	[33]	+
Ln(Kent)	Log value of the number of ‘Korean entertainment’ searches	[33]	+
Other explanatory variables
Ln(PGDP)	Log value of per capita GDP	[45]	+
Ln(GDPGR)	Log value GDP growth rate	[45]	+
Ln(RCON)	Log value of total retail sales	[45]	+
Ln(WFDI)	Log vlue of the amount of FDI attracted from the world	[45,46]	+
Ln(KFDI) DUMMY	Log value of the amount of FDI attracted from Korea Dummy variable for whether or not it is located in a coastal area	[45,46]	? +

Note: All variables are measured at the Chinese provincial level.

.

5. Results and Discussion

Prior to the regression analysis, several tests were performed. Firstly, multicollinearity was tested. As a result of variance inflation factor (VIF) estimation, the VIF estimates of each variable were all less than 10, and the average VIF value was also less than 5, indicating that there was no multicollinearity. Next, the Breusch–Pagan test was performed, and as a result, heteroscedasticity was found, indicating that the random effect model is more efficient than the pooled OLS model. Next, the F-test was also conducted, and the F value was found to be significant at the 1% level, indicating that the fixed effect model is a better model than the pooled OLS model. In consideration of the test results described above and considering that the panel data used in this study are very strongly balanced, the fixed effect model and random effect model analysis were used instead of pooled OLS. In addition, to confirm which of the two models is more suitable, the Hausman test was performed for each regression analysis.

First,

Table 6. The Impact of Hallyu on Korea’s Consumer Goods Exports to China.

	FE	RE
ln(pgdp)	2.463 (0.040) **	1.628 (0.006) ***
ln(gdpgr)	−0.088 (0.676)	−0.189 (0.315)
ln(rcon)	0.712 (0.329)	1.110 (0.003) ***
ln(wfdi)	0.111 (0.524)	0.285 (0.053) *
ln(kfdi)	−0.056 (0.034) **	−0.028 (0.253)
dummy	(omitted)	2.863 (0.000) ***
ln(kwave)	−0.039 (0.913)	0.058 (0.867)
constant	−11.230 (0.110)	−9.420 (0.032) **
R2	0.585	0.738
Hausman test	p = 0.030

Notes: (1) p-values in parentheses. (2) * p < 0.1, ** p < 0.05, *** p < 0.001.

shows the results of the regression for all consumer goods exports. First, per capita GDP (PGDP), a variable representing income level, showed statistically significant positive values in both the fixed effect model and the random effect model. This means that there are more exports to regions with high income levels, which is consistent with the standard theory that exports increase as the income level of the importing region increases. The economic growth rate (GDPGR) was not statistically significant in both models. In this study, the reason why the economic growth rate did not have a positive effect on Korea’s exports of consumer goods to China is that, after the global economic crisis, inland regions with relatively low income levels achieved faster economic growth than coastal regions with relatively high income levels.

The total retail sales of consumer goods (RCON), a variable representing market size, was estimated to have a statistically significant positive value in the random effects model. This shows that market size acts as a factor in increasing Korea’s consumer goods exports to China and is not different from the prediction. WFDI, a variable indicating the degree of openness, was also found to have a statistically significant positive value in the random effect model. This result shows that a province that attracts more foreign direct investment and is more open has a positive impact on Korea’s consumer goods exports to that province. Meanwhile, Korea’s direct investment (KFDI) did not appear to have a positive effect on Korea’s exports of consumer goods to China. This is interpreted to be because the dependent variable in this study targets only consumer goods exports, not total exports. In other words, the export creation effect is an effect that occurs when a company that moves its production base overseas receives from its home country the intermediate goods needed for overseas production. However, since this study only targets consumer goods, it does not appear that there is a positive relationship between exports and investment. The dummy variable (DUMMY), indicating whether an area is a coastal area, was found to have a statistically significant positive value as expected. In other words, coastal regions have a positive impact on exports by reducing logistics time and costs compared to inland regions. Lastly, our variable of interest, the Korean Wave variable (KWAVE), did not appear statistically significant in either the fixed effect model or the random effect model.

Next,

Table 7. The Impact of Hallyu on Korea’s Consumer Goods Exports to China by Processing Stage.

	Primary Household Food and Beverages ln(ex1)		Processed Household Food and Beverages ln(ex2)		Passenger Motor Cars ln(ex3)		Other Non-Industrial Transport Equipment ln(ex4)		Durable Consumer Goods ln(ex5)		Semi-Durable Consumer Goods ln(ex6)		Non-Durable Consumer Goods ln(ex7)
	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE
ln(pgdp)	−0.196 (0.932)	−0.638 (0.636)	1.529 (0.275)	0.429 (0.537)	−3.282 (0.453)	1.455 (0.409)	1.105 (0.806)	0.948 (0.572)	2.129 (0.158)	1.379 (0.037) **	1.705 (0.214)	1.012 (0.111)	2.759 (0.038) **	3.062 (0.000) ***
ln(gdpgr)	0.254 (0.515)	0.210 (0.536)	−0.206 (0.384)	−0.304 (0.132)	1.416 (0.067) *	1.916 (0.001) ***	1.204 (0.085) *	1.327 (0.010) **	0.054 (0.831)	−0.001 (0.996)	−0.395 (0.102)	−0.508 (0.016) **	0.359 (0.129)	0.387 (0.061) *
ln(rcon)	−0.713 (0.564)	−0.589 (0.458)	−0.668 (0.411)	0.220 (0.611)	3.656 (0.189)	0.153 (0.905)	−0.601 (0.840)	−0.293 (0.814)	−0.209 (0.813)	0.315 (0.460)	0.581 (0.480)	0.943 (0.023) **	0.981 (0.220)	0.546 (0.231)
ln(wfdi)	0.486 (0.219)	0.489 (0.149)	0.443 (0.043) **	0.504 (0.010) **	−0.981 (0.169)	−0.512 (0.397)	1.075 (0.173)	0.634 (0.307)	0.373 (0.129)	0.482 (0.014) **	0.241 (0.256)	0.463 (0.007) ***	0.280 (0.169)	0.249 (0.150)
ln(kfdi)	0.042 (0.579)	0.060 (0.370)	−0.036 (0.227)	−0.002 (0.930)	0.398 (0.153)	0.181 (0.393)	−0.143 (0.535)	−0.040 (0.758)	0.057 (0.081) *	0.138 (0.000) ***	−0.092 (0.002) ***	−0.051 (0.068) *	−0.032 (0.262)	−0.023 (0.395)
dummy	(omitted)	4.857 (0.000) ***	(omitted)	3.537 (0.000) ***	(omitted)	4.562 (0.008) ***	(omitted)	−0.095 (0.949)	(omitted)	2.382 (0.000) ***	(omitted)	3.079 (0.000) ***	(omitted)	1.913 (0.007) ***
ln(kwave)	0.652 (0.306)	0.797 (0.171)	0.602 (0.120)	0.637 (0.080) *	−3.228 (0.006) ***	−2.917 (0.002) ***	0.405 (0.717)	0.337 (0.726)	0.003 (0.994)	0.117 (0.775)	−0.208 (0.607)	−0.147 (0.702)	0.685 (0.083) *	0.794 (0.036) **
constant	9.051 (0.502)	7.156 (0.420)	−2.984 (0.708)	−1.376 (0.776)	48.362 (0.070) *	18.696 (0.169)	−11.692 (0.647)	−8.464 (0.466)	−7.815 (0.368)	−7.608 (0.116)	−4.221 (0.598)	−3.690 (0.440)	−24.514 (0.002) ***	−25.758 (0.000) ***
R2	0.195	0.387	0.467	0.707	0.051	0.407	0.129	0.170	0.618	0.7.4	0.440	0.687	0.550	0.629
Hausman test	p = 0.983		p = 0.013		p = 0.730		p = 0.972		p = 0.000		p = 0.002		p = 0.001

Notes: (1) p-values in parentheses. (2) * p < 0.1, ** p < 0.05, *** p < 0.001.

shows the regression results for exports of consumer goods by processing step: primary household food and beverages, processed household food and beverages, passenger motor cars, other non-industrial transport equipment, durable consumer goods, semi-durable consumer goods, and non-durable consumer goods. As the table shows, in the non-durable consumer goods exports (lnex7) equation, the Korean Wave was found to have a statistically significant positive value at the significance levels of 10% and 5% in the fixed effect model and random effect model, respectively. The coefficient values for the Korean Wave were found to be 0.685 and 0.794 in the fixed effect model and the random effect model, respectively, which means that for every 1% increase in the Korean Wave variable, exports of non-durable consumer goods increase by 0.685–0.794%. In addition, in the case of processed household food and beverage products, the Korean Wave was estimated to have a statistically significant positive value at the 10% significance level in the random effect model. These results mean that in regions where interest in the Korean Wave is high, Korea’s exports of non-durable consumer goods and processed household food and beverage products to that region increase. This result is consistent with previous research showing that interest in the Korean Wave leads to the purchase of Korean products such as clothing, cosmetics, food, and beverages.

Table 8. The Impact of Hallyu on Korea’s Consumer Goods Exports to China by Processing Stage: Robustness Test.

	Primary Household Food and Beverages (lnex1)	Processed Household Food and Beverages (lnex2)	Passenger Motor Cars (lnex3)	Other Non-Industrial Transport Equipment (lnex4)	Durable Consumer Goods (lnex5)	Semi-Durable Consumer Goods (lnex6)	Non-Durable Consumer Goods (lnex7)
ln(ex1).L1	0.022 (0.835)	0.155 (0.129)	0.677 (0.001) ***	−0.324 (0.130)	0.083 (0.459)	0.356 (0.000) ***	0.467 (0.000) ***
ln(gdpgr)	−0.289 (0.524)	−0.160 (0.756)	2.765 (0.359)	2.442 (0.342)	−0.555 (0.270)	−0.070 (0.872)	−0.123 (0.817)
ln(wfdi)	0.527 (0.172)	0.747 (0.028) **	−1.024 (0.465)	2.187 (0.158)	0.358 (0.289)	1.038 (0.000) ***	−0.102 (0.729)
ln(Kfdi)	0.089 (0.142)	0.024 (0.527)	0.134 (0.826)	0.148 (0.801)	0.060 (0.090) *	−0.117 (0.000) ***	−0.023 (0.527)
dummy	3.583 (0.000) ***	−4.051 (0.024) **	5.964 (0.123)	1.299 (0.901)	8.895 (0.000) ***	3.505 (0.000) ***	−1.151 (0.554)
ln(kwave)	−0.226 (0.451)	0.768 (0.010) **	−1.058 (0.390)	0.376 (0.721)	0.184 (0.551)	0.091 (0.726)	0.823 (0.020) **
constant	7.579 (0.014) **	1.752 (0.627)	10.950 (0.532)	−18.670 (0.217)	4.790 (0.172)	−1.283 (0.628)	3.517 (0.247)

Notes: (1) p-values in parentheses. (2) * p < 0.1, ** p < 0.05, *** p < 0.001.

shows the robustness test results for exports of consumer goods by processing step. The System GMM estimation results show that in the processed household food and beverages equation (lnex2) and the non-durable consumer goods exports (lnex7) equation, the Korean Wave was found to still have a statistically significant positive impact on Korea’s consumer goods exports to Chinese provinces.

Table 9. The Impact of Hallyu on Korea’s Consumer Goods Exports to China by Processing Stage: Before THAAD Dispute (2011–2015).

	Primary Household Food and Beverages ln(ex1)		Processed Household Food and Beverages ln(ex2)		Passenger Motor Cars ln(ex3)		Other Non-Industrial Transport Equipment ln(ex4)		Durable Consumer Goods ln(ex5)		Semi-Durable Consumer Goods ln(ex6)		Non-Durable Consumer Goods ln(ex7)
	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE
ln(pgdp)	−1.278 (0.745)	−1.042 (0.580)	1.263 (0.645)	0.446 (0.623)	4.764 (0.437)	0.888 (0.672)	2.649 (0.818)	0.380 (0.872)	2.692 (0.308)	1.375 (0.129)	3.024 (0.147)	0.651 (0.449)	2.191 (0.239)	2.536 (0.001) ***
ln(gdpgr)	−0.879 (0.577)	−0.573 (0.645)	−0.912 (0.439)	−0.506 (0.537)	1.465 (0.529)	0.287 (0.896)	−0.978 (0.846)	0.233 (0.938)	−1.458 (0.187)	−1.074 (0.178)	−0.389 (0.642)	0.250 (0.725)	−0.646 (0.432)	0.106 (0.859)
ln(rcon)	−2.401 (0.269)	−2.149 (0.087) *	−0.876 (0.551)	0.528 (0.383)	−5.484 (0.176)	−2.008 (0.152)	−3.193 (0.645)	−0.608 (0.713)	−1.560 (0.267)	0.095 (0.870)	−1.966 (0.133)	0.547 (0.338)	−0.595 (0.559)	−0.424 (0.397)
ln(wfdi)	1.375 (0.101)	1.109 (0.062) *	0.563 (0.231)	0.505 (0.142)	−0.420 (0.795)	−1.093 (0.280)	−0.380 (0.904)	0.494 (0.674)	0.833 (0.069) *	0.524 (0.087) *	1.156 (0.003) ***	1.134 (0.000) ***	0.258 (0.431)	0.318 (0.190)
ln(Kfdi)	0.141 (0.283)	0.137 (0.183)	−0.115 (0.009) ***	−0.050 (0.208)	0.128 (0.795)	0.194 (0.445)	−0.583 (0.492)	0.053 (0.822)	0.029 (0.480)	0.123 (0.001) ***	−0.134 (0.001) ***	−0.075 (0.040) **	−0.002 (0.948)	0.010 (0.714)
dummy	(omitted)	3.912 (0.015) **	(omitted)	3.658 (0.000) ***	(omitted)	6.090 (0.001) ***	(omitted)	−0.831 (0.674)	(omitted)	1.727 (0.009) ***	(omitted)	3.182 (0.000) ***	(omitted)	2.079 (0.002) ***
ln(kwave)	2.252 (0.048) **	2.232 (0.027) **	0.334 (0.641)	0.758 (0.269)	−2.165 (0.085) *	−1.832 (0.140)	0.542 (0.805)	0.442 (0.808)	0.456 (0.509)	0.810 (0.242)	−0.969 (0.150)	−0.363 (0.583)	1.398 (0.007) ***	1.528 (0.002) ***
constant	12.122 (0.642)	7.131 (0.651)	3.209 (0.861)	−3.977 (0.641)	25.844 (0.492)	38.516 (0.105)	11.717 (0.876)	2.011 (0.935)	−7.749 (0.662)	−8.749 (0.298)	−1.677 (0.900)	−3.790 (0.638)	−12.030 (0.333)	−20.308 (0.004) ***
R2	0.240	0.397	0.103	0.713	0.106	0.495	0.002	0.031	0.445	0.717	0.002	0.709	0.66	0.734
Hausman test	p = 0.993		p = 0.048		p = 0.830		p = 0.975		p = 0.000		p = 0.000		p = 0.003

Notes: (1) p-values in parentheses. (2) * p < 0.1, ** p < 0.05, *** p < 0.001.

and

Table 10. The Impact of Hallyu on Korea’s Consumer Goods Exports to China by Processing Stage: After THAAD Dispute (2016–2020).

	Primary Household Food and Beverages ln(ex1)		Processed Household Food and Beverages ln(ex2)		Passenger Motor Cars ln(ex3)		Other Non-Industrial Transport Equipment ln(ex4)		Durable Consumer Goods ln(ex5)		Semi-Durable Consumer Goods ln(ex6)		Non-Durable Consumer Goods ln(ex7)
	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE
ln(pgdp)	−4.732 (0.268)	−2.372 (0.159)	0.405 (0.879)	0.745 (0.381)	−1.416 (0.886)	3.596 (0.102)	−2.335 (0.705)	−0.100 (0.960)	1.756 (0.593)	1.573 (0.067) *	1.725 (0.549)	1.679 (0.042) **	2.245 (0.450)	2.578 (0.021) **
ln(gdpgr)	0.325 (0.422)	0.227 (0.517)	0.078 (0.711)	−0.050 (0.791)	0.917 (0.523)	0.926 (0.326)	0.524 (0.516)	0.920 (0.049) **	−0.185 (0.496)	−0.172 (0.458)	−0.275 (0.295)	−0.561 (0.011) **	0.664 (0.018) **	0.534 (0.029) **
ln(rcon)	2.310 (0.598)	0.934 (0.435)	−0.059 (0.983)	0.123 (0.838)	5.126 (0.590)	−1.404 (0.459)	2.596 (0.682)	1.502 (0.380)	−1.340 (0.697)	−0.349 (0.587)	1.164 (0.706)	0.556 (0.362)	3.250 (0.318)	1.740 (0.032) **
ln(wfdi)	−0.364 (0.691)	0.246 (0.702)	0.502 (0.125)	0.451 (0.065) *	−1.533 (0.645)	−0.733 (0.532)	1.539 (0.366)	1.026 (0.227)	0.724 (0.105)	0.696 (0.008) ***	−0.481 (0.166)	0.156 (0.474)	0.224 (0.539)	0.315 (0.230)
ln(Kfdi)	−0.019 (0.853)	0.071 (0.379)	0.054 (0.141)	0.084 (0.014) **	0.271 (0.865)	−0.040 (0.957)	−0.224 (0.731)	−0.182 (0.342)	0.100 (0.040) **	0.196 (0.000) ***	−0.046 (0.277)	0.023 (0.553)	−0.060 (0.166)	−0.038 (0.345)
dummy	(omitted)	6.039 (0.000) ***	(omitted)	2.987 (0.000) ***	(omitted)	0.302 (0.895)	(omitted)	1.574 (0.418)	(omitted)	2.394 (0.001) ***	(omitted)	2.411 (0.001) ***	(omitted)	2.631 (0.015) **
ln(kwave)	−1.543 (0.286)	−0.823 (0.522)	−0.813 (0.277)	0.295 (0.672)	−1.003 (0.827)	3.033 (0.324)	−1.506 (0.476)	−2.070 (0.209)	−0.125 (0.900)	0.449 (0.610)	−0.227 (0.812)	0.336 (0.683)	−1.699 (0.087) *	−1.270 (0.157)
constant	55.505 (0.048) **	27.063 (0.081) *	13.398 (0.301)	−0.628 (0.937)	8.498 (0.915)	−31.104 (0.261)	10.124 (0.814)	4.379 (0.821)	1.658 (0.919)	−9.263 (0.273)	−2.392 (0.871)	−8.031 (0.337)	−16.499 (0.275)	−14.242 (0.174)
R2	0.062	0.436	0.271	0.704	0.011	0.453	0.200	0.411	0.489	0.754	0.125	0.691	0.401	0.557
Hausman test	p = 0.795		p = 0.000		p = 0.878		p = 0.961		p = 0.000		p = 0.000		p = 0.630

Notes: (1) p-values in parentheses. (2) * p < 0.1, ** p < 0.05, *** p < 0.001.

show the regression results analyzed by dividing the entire period into before the THAAD deployment issue (2011–2015) and after the THAAD issue (2016–2020). Before the THAAD issue, the Korean Wave was found to have a statistically significant positive value in both the fixed effect model and the random effect model in two processing steps: primary household food and beverages and non-durable consumer goods. In contrast, after the introduction of THAAD, the Korean Wave did not have a statistically significant positive impact on Korea’s exports of consumer goods to China at any step of processing. The above results show that the political issue of THAAD deployment had a negative impact on Korea’s exports of consumer goods to China.

Finally,

Table 11. The Impact of Hallyu on Korea’s Consumer Goods Exports to China by Processing Stage: Drama.

	Primary Household Food and Beverages ln(ex1)		Processed Household Food and Beverages ln(ex2)		Passenger Motor Cars ln(ex3)		Other Non-Industrial Transport Equipment ln(ex4)		Durable Consumer Goods ln(ex5)		Semi-Durable Consumer Goods ln(ex6)		Non-Durable Consumer Goods ln(ex7)
	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE
ln(pgdp)	0.003 (0.999)	−0.140 (0.912)	2.065 (0.126)	0.854 (0.154)	−5.998 (0.184)	0.838 (0.611)	1.420 (0.747)	1.121 (0.480)	1.840 (0.195)	1.458 (0.023) **	1.675 (0.206)	0.938 (0.119)	3.163 (0.014) **	3.637 (0.000) ***
ln(gdpgr)	0.104 (0.793)	0.072 (0.833)	−0.233 (0.342)	−0.422 (0.035) **	1.579 (0.063) *	2.379 (0.000) ***	1.066 (0.133)	1.252 (0.016) **	−0.075 (0.773)	−0.105 (0.630)	−0.322 (0.190)	−0.500 (0.018) **	0.260 (0.280)	0.302 (0.148)
ln(rcon)	−0.872 (0.477)	−0.900 (0.264)	−0.516 (0.524)	−0.085 (0.839)	2.927 (0.322)	−1.310 (0.283)	−1.090 (0.710)	−0.552 (0.656)	−0.586 (0.504)	−0.417 (0.359)	0.736 (0.364)	0.824 (0.054) *	0.973 (0.219)	0.538 (0.252)
ln(wfdi)	0.449 (0.247)	0.399 (0.234)	0.416 (0.059) *	0.406 (0.034) **	−0.389 (0.587)	−0.104 (0.870)	1.123 (0.148)	0.619 (0.311)	0.376 (0.121)	0.391 (0.045) **	0.249 (0.239)	0.469 (0.006) ***	0.240 (0.236)	0.163 (0.350)
ln(Kfdi)	0.041 (0.588)	0.047 (0.472)	−0.037 (0.222)	0.000 (0.988)	0.182 (0.510)	0.073 (0.740)	−0.136 (0.554)	−0.054 (0.676)	0.060 (0.063) *	0.126 (0.000) ***	−0.094 (0.002) ***	−0.051 (0.070) *	−0.032 (0.268)	−0.026 (0.334)
dummy	(omitted)	4.308 (0.001) ***	(omitted)	3.001 (0.000) ***	(omitted)	5.079 (0.002) ***	(omitted)	−0.307 (0.840)	(omitted)	2.042 (0.000) ***	(omitted)	3.076 (0.000) ***	(omitted)	1.477 (0.039) **
ln(kwave)	1.834 (0.068) *	1.946 (0.029) **	0.490 (0.418)	1.524 (0.003) ***	−2.456 (0.125)	−1.711 (0.239)	1.387 (0.358)	0.942 (0.487)	1.215 (0.071) *	1.610 (0.006) ***	−0.864 (0.167)	0.040 (0.942)	1.269 (0.043) **	1.084 (0.058) *
constant	1.243 (0.921)	−0.975 (0.914)	−7.212 (0.357)	−7.196 (0.132)	65.767 (0.019) **	19.165 (0.172)	−17.965 (0.483)	−11.684 (0.333)	−10.658 (0.206)	−12.172 (0.018) **	−1.024 (0.898)	−3.700 (0.471)	−30.782 (0.000) ***	−30.955 (0.000) ***
R2	0.317	0.401	0.514	0.746	0.168	0.375	0.117	0.163	0.674	0.718	0.278	0.688	0.562	0.622
Hausman test	p = 0.998		p = 0.036		p = 0.073		p = 0.945		p = 0.000		p = 0.000		p = 0.325

Notes: (1) p-values in parentheses. (2) * p < 0.1, ** p < 0.05, *** p < 0.001.

,

Table 12. The Impact of Hallyu on Korea’s Consumer Goods Exports to China by Processing Stage: Movie.

	Primary Household Food and Beverages ln(ex1)		Processed Household Food and Beverages ln(ex2)		Passenger Motor Cars ln(ex3)		Other Non-Industrial Transport Equipment ln(ex4)		Durable Consumer Goods ln(ex5)		Semi-Durable Consumer Goods ln(ex6)		Non-Durable Consumer Goods ln(ex7)
	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE
ln(pgdp)	0.004 (0.999)	−0.523 (0.702)	1.532 (0.269)	0.508 (0.475)	−4.288 (0.315)	1.186 (0.500)	1.284 (0.773)	0.961 (0.565)	2.356 (0.115)	1.590 (0.019) **	1.537 (0.261)	1.032 (0.112)	2.683 (0.042) **	2.894 (0.000) ***
ln(gdpgr)	0.308 (0.428)	0.256 (0.457)	−0.158 (0.504)	−0.286 (0.162)	0.923 (0.225)	1.517 (0.012) **	1.236 (0.079) *	1.348 (0.009) ***	0.049 (0.847)	−0.037 (0.868)	−0.397 (0.103)	−0.516 (0.016) **	0.415 (0.080) *	0.438 (0.035) **
ln(rcon)	−0.685 (0.579)	−0.441 (0.571)	−0.687 (0.396)	0.410 (0.312)	3.856 (0.164)	−0.021 (0.987)	−0.454 (0.880)	−0.205 (0.858)	−0.117 (0.894)	0.512 (0.188)	0.475 (0.562)	0.918 (0.014) **	0.940 (0.236)	0.628 (0.142)
ln(wfdi)	0.492 (0.216)	0.500 (0.144)	0.460 (0.036) **	0.512 (0.010) **	−1.282 (0.085) *	−0.770 (0.212)	1.051 (0.185)	0.625 (0.315)	0.359 (0.144)	0.446 (0.025) **	0.248 (0.244)	0.456 (0.009) ***	0.302 (0.139)	0.290 (0.097) *
ln(Kfdi)	0.044 (0.566)	0.062 (0.350)	−0.038 (0.208)	−0.004 (0.901)	0.475 (0.097) *	0.255 (0.235)	−0.143 (0.536)	−0.038 (0.769)	0.057 (0.080) *	0.134 (0.000) ***	−0.092 (0.002) ***	−0.051 (0.068) *	−0.034 (0.241)	−0.023 (0.392)
dummy	(omitted)	4.919 (0.000) ***	(omitted)	3.599 (0.000) ***	(omitted)	4.145 (0.018) **	(omitted)	−0.062 (0.966)	(omitted)	2.342 (0.000) ***	(omitted)	3.051 (0.000) ***	(omitted)	2.097 (0.004) ***
ln(kwave)	0.310 (0.364)	0.359 (0.255)	0.362 (0.087) *	0.246 (0.211)	−1.870 (0.004) ***	−1.730 (0.001) ***	0.130 (0.836)	0.159 (0.761)	−0.114 (0.624)	−0.141 (0.519)	−0.012 (0.958)	−0.083 (0.693)	0.446 (0.040) **	0.490 (0.016) **
constant	9.871 (0.485)	8.613 (0.363)	−0.940 (0.910)	−0.276 (0.957)	47.086 (0.076) *	14.460 (0.290)	−11.922 (0.646)	−7.637 (0.532)	−9.552 (0.292)	−8.576 (0.091) *	−3.566 (0.669)	−4.187 (0.405)	−21.622 (0.007) ***	−22.570 (0.000) ***
R2	0.154	0.378	0.384	0.697	0.047	0.434	0.132	0.174	0.611	0.701	0.443	0.688	0.543	0.628
Hausman test	p = 0.995		p = 0.373		p = 0.763		p = 0.967		p = 0.000		p = 0.001		p = 0.072

Notes: (1) p-values in parentheses. (2) * p < 0.1, ** p < 0.05, *** p < 0.001.

,

Table 13. The Impact of Hallyu on Korea’s Consumer Goods Exports to China by Processing Stage: Music.

	Primary Household Food and Beverages ln(ex1)		Processed Household Food and Beverages ln(ex2)		Passenger Motor Cars ln(ex3)		Other Non-Industrial Transport Equipment ln(ex4)		Durable Consumer Goods ln(ex5)		Semi-Durable Consumer Goods ln(ex6)		Non-Durable Consumer Goods ln(ex7)
	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE
ln(pgdp)	0.829 (0.685)	0.234 (0.854)	2.192 (0.101)	1.055 (0.058) *	−5.519 (0.219)	0.457 (0.785)	1.215 (0.785)	1.027 (0.514)	2.184 (0.126)	1.657 (0.005) ***	1.399 (0.281)	0.621 (0.310)	3.501 (0.007) ***	3.700 (0.000) ***
ln(gdpgr)	0.212 (0.591)	0.101 (0.770)	−0.250 (0.310)	−0.501 (0.014) **	1.763 (0.042) **	2.515 (0.000) ***	1.253 (0.075) *	1.377 (0.008) ***	0.015 (0.954)	−0.091 (0.684)	−0.217 (0.370)	−0.420 (0.048) **	0.333 (0.167)	0.339 (0.105)
ln(rcon)	−0.643 (0.601)	−0.385 (0.608)	−0.381 (0.632)	0.497 (0.110)	1.548 (0.581)	−1.725 (0.100)	−0.034 (0.990)	0.156 (0.876)	−0.237 (0.783)	0.243 (0.452)	0.380 (0.623)	0.989 (0.003) ***	1.337 (0.085) *	1.001 (0.011) **
ln(wfdi)	0.415 (0.291)	0.415 (0.220)	0.410 (0.062) *	0.418 (0.026) **	−0.264 (0.710)	−0.045 (0.942)	0.985 (0.203)	0.587 (0.334)	0.356 (0.147)	0.434 (0.023) **	0.322 (0.123)	0.547 (0.001) ***	0.231 (0.264)	0.185 (0.300)
ln(Kfdi)	0.032 (0.673)	0.038 (0.582)	−0.045 (0.145)	−0.003 (0.926)	0.199 (0.470)	0.120 (0.580)	−0.111 (0.647)	−0.019 (0.886)	0.054 (0.097) *	0.148 (0.000) ***	−0.078 (0.008) ***	−0.038 (0.175)	−0.039 (0.185)	−0.028 (0.312)
dummy	(omitted)	4.733 (0.000) ***	(omitted)	3.196 (0.000) ***	(omitted)	4.820 (0.004) ***	(omitted)	−0.123 (0.933)	(omitted)	2.173 (0.000) ***	(omitted)	3.212 (0.000) ***	(omitted)	1.737 (0.015) **
ln(kwave)	0.838 (0.254)	1.012 (0.121)	0.390 (0.318)	1.103 (0.003) ***	−2.007 (0.073) *	−1.883 (0.073) *	−0.395 (0.710)	−0.665 (0.482)	0.296 (0.495)	0.759 (0.073) *	−1.033 (0.002) ***	−0.609 (0.051) *	0.308 (0.374)	0.227 (0.487)
constant	1.199 (0.926)	0.475 (0.959)	−7.612 (0.332)	−7.647 (0.093) *	61.450 (0.027) **	21.457 (0.125)	−11.091 (0.667)	−6.346 (0.595)	−9.207 (0.284)	−11.477 (0.021) **	1.768 (0.822)	0.108 (0.983)	−29.181 (0.000) ***	−28.728 (0.000) ***
R2	0.212	0.385	0.484	0.745	0.133	0.373	0.151	0.180	0.633	0.722	0.228	0.680	0.546	0.616
Hausman test	p = 0.995		p = 0.000		p = 0.846		p = 0.980		p = 0.000		p = 0.000		p = 0.979

Notes: (1) p-values in parentheses. (2) * p < 0.1, ** p < 0.05, *** p < 0.001.

and

Table 14. The Impact of Hallyu on Korea’s Consumer Goods Exports to China by Processing Stage: Entertainment.

	Primary Household Food and Beverages ln(ex1)		Processed Household Food and Beverages ln(ex2)		Passenger Motor Cars ln(ex3)		Other Non-Industrial Transport Equipment ln(ex4)		Durable Consumer Goods ln(ex5)		Semi-Durable Consumer Goods ln(ex6)		Non-Durable Consumer Goods ln(ex7)
	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE	FE	RE
ln(pgdp)	−0.104 (0.971)	−0.574 (0.715)	1.232 (0.477)	0.425 (0.580)	8.610 (0.176)	3.571 (0.036) **	4.931 (0.351)	1.896 (0.286)	1.069 (0.565)	1.201 (0.115)	2.953 (0.060) *	1.439 (0.028) **	4.002 (0.010) **	3.661 (0.000) ***
ln(gdpgr)	0.204 (0.642)	0.136 (0.699)	−0.278 (0.285)	−0.356 (0.080) *	3.044 (0.002) ***	2.394 (0.000) ***	1.645 (0.035) **	1.420 (0.006) ***	−0.046 (0.868)	−0.019 (0.930)	−0.264 (0.294)	−0.478 (0.022) **	0.423 (0.091) *	0.366 (0.081) *
ln(rcon)	−0.475 (0.707)	−0.297 (0.699)	−0.257 (0.751)	0.488 (0.213)	−1.488 (0.595)	−0.496 (0.628)	−0.621 (0.823)	0.447 (0.683)	−0.066 (0.939)	0.311 (0.421)	0.322 (0.683)	1.090 (0.002) ***	1.293 (0.098) *	1.092 (0.008) ***
ln(wfdi)	0.460 (0.246)	0.476 (0.166)	0.420 (0.056) *	0.476 (0.015) **	−0.152 (0.819)	−0.116 (0.845)	0.852 (0.270)	0.485 (0.433)	0.367 (0.132)	0.473 (0.017) **	0.273 (0.195)	0.481 (0.004) ***	0.266 (0.194)	0.215 (0.216)
ln(Kfdi)	0.045 (0.557)	0.059 (0.375)	−0.038 (0.215)	−0.005 (0.864)	0.147 (0.563)	0.009 (0.966)	−0.187 (0.420)	−0.074 (0.576)	0.059 (0.071) *	0.124 (0.000) ***	−0.091 (0.002) ***	−0.046 (0.100)	−0.035 (0.232)	−0.024 (0.374)
dummy	(omitted)	4.941 (0.000) ***	(omitted)	3.580 (0.000) ***	(omitted)	4.020 (0.005) ***	(omitted)	−0.169 (0.909)	(omitted)	2.510 (0.000) ***	(omitted)	2.937 (0.000) ***	(omitted)	1.766 (0.015) **
ln(kwave)	0.304 (0.623)	0.377 (0.459)	0.350 (0.371)	0.334 (0.296)	−3.642 (0.002) ***	−2.489 (0.002) ***	−1.102 (0.228)	−0.675 (0.349)	0.377 (0.377)	0.193 (0.578)	−0.612 (0.094) *	−0.548 (0.084) *	−0.252 (0.490)	−0.078 (0.811)
constant	10.266 (0.564)	8.839 (0.408)	−0.077 (0.994)	0.206 (0.970)	−39.966 (0.334)	−8.413 (0.567)	−35.982 (0.251)	−14.494 (0.258)	−1.104 (0.922)	−6.075 (0.273)	−12.417 (0.191)	−6.780 (0.178)	−31.109 (0.001) ***	−27.890 (0.000) ***
R2	0.178	0.374	0.486	0.701	0.273	0.434	0.081	0.187	0.649	0.695	0.390	0.692	0.546	0.614
Hausman test	p = 1.000		p = 0.028		p = 1.000		p = 0.908		p = 0.000		p = 0.001		p = 0.000

Notes: (1) p-values in parentheses. (2) * p < 0.1, ** p < 0.05, *** p < 0.001.

show the regression results of each Hallyu variable: dramas, movies, music, and entertainment. As predicted, dramas, the most popular Korean Wave content in China, were estimated to have statistically significant positive values in four processing steps: primary household food and beverages, processed household food and beverages, durable consumer goods, and non-durable consumer goods. Furthermore, except for processed household food and beverage products, it was significant in both the fixed effect model and the random effect model. Movies were also estimated to have a statistically significant positive impact at the 5% significance level in both the fixed effect model and the random effect model in a regression model with exports of non-durable consumer goods as the dependent variable. In the regression model using processed household food and beverage products as the dependent variable, movies were found to have a significant positive impact in the fixed effect model as well. In addition, it was found that the higher the interest in Korean music, the higher Korea’s exports of primary household food and beverages and durable consumer goods to China were. On the other hand, entertainment did not have a significant effect on Korea’s exports of consumer goods to China.

6. Conclusions

In the 2010s, the central axis of Hallyu shifted to popular music centered on idol groups, entering the era of “New Hallyu”. It is becoming more diverse and is expanding regionally, not only in Asia but also around the world. In addition, New Hallyu is creating ripple effects as it is combined with other industries as well as the cultural industry.

Against this background, this study empirically analyzed how the Hallyu phenomenon affected Korea’s consumer goods exports to China using Chinese provincial panel data covering the period from 2011 to 2020. While existing studies on the ripple effects of the Korean Wave were mainly based on surveys, this study used data extracted from big data as a proxy variable for the Korean Wave. In other words, we measured interest in the Korean Wave in 31 Chinese provinces using Baidu Trends. The four keywords used in the search were “Korean drama”, “Korean movie”, “Korean music”, and “Korean entertainment”. Unlike existing studies on the Korean Wave, which were limited to specific items such as cosmetics or fashion, this study targeted all consumer goods and examined them by dividing them into seven processing stages. In addition, to examine the impact of the political issue of THAAD deployment, the entire period was divided into before and after 2016.

The conclusions drawn from this study are as follows. First, the Korean Wave in China had a significant positive impact on Korea’s exports of non-durable consumer goods and processed household food and beverages. In other words, the higher the interest in the Korean Wave, the higher the exports of non-durable consumer goods and processed household food and beverages from Korea. Second, the political issue of the introduction of THAAD had a negative impact on Korea’s exports of consumer goods to China. The Korean Wave before the THAAD issue had a significant positive impact on Korea’s exports of consumer goods in two processing steps: primary household food and beverages and non-durable consumer goods. In contrast, after the deployment of THAAD, interest in the Korean Wave was not found to be positively significant at any stage of processing. Third, among the four Korean Wave content categories, dramas, the most popular content in China, had the greatest impact. Dramas were found to promote Korea’s export of consumer goods to China in four processing steps: primary household food and beverages, processed household food and beverages, durable consumer goods, and non-durable consumer goods. In addition, it was found that the higher the income level, the presence of a coastal region, the larger the market size, and the higher the degree of openness, the higher the exports of Korea’s consumer goods to that region.

The results of the above-mentioned empirical analysis and the analysis of the main text indicate that the following policy efforts are necessary for the Korean Wave to play a sustainable role in the growth of Korea’s exports to China in the future. Firstly, Korea should increase exports of consumer goods to China by improving the current export structure, which is excessively focused on intermediate goods. After the global financial crisis, China implemented a growth policy led by domestic demand, and China’s trade structure is also rapidly changing from processing trade to trade targeting its internal consumption. However, intermediate goods still account for an absolute portion of Korea’s exports to China, and its proportion has increased since the 2010s, failing to respond to China’s changing growth paradigm and trade structure. Since China is expected to focus more on domestic demand in the future, Korea needs to make an effort to advance into China’s expanding consumer goods market. Secondly, since the Korean Wave is having a positive impact on Korea’s exports of consumer goods to China, it is necessary to make efforts to preserve the popularity of Korean cultural content in China while reducing the factors that hinder it. For example, in the case of dramas, “a textured and solid story” is recognized as the most popular factor, but “stale and uniform material” and “inconvenience of translated subtitles” are pointed out as major factors that hinder favorable feelings for Korean dramas [32]. Therefore, in order to continue the popularity of the Korean Wave in China, it is necessary to solve these problems. Thirdly, when a political conflict between the two countries arises, it is also necessary to make efforts at the government level to alleviate it, for example, by conducting negotiations between the central governments to take a separate approach to politics and the economy, along with holding periodic cultural exchange events to maintain friendly relations with local governments in China.

Let us close by pointing out the limitations of this study. The main limitation is that the keyword search for the Korean Wave in this study did not fully reflect information on the Korean Wave in China. In this study, we adopted Baidu Index data with the keywords “Korean drama”, “Korean movie”, “Korean music”, and “Korean entertainment” as proxy variables for the Korean Wave. However, in addition to these comprehensive searches, people are actually searching for specific dramas, movies, music and singers, and variety shows. These limitations will be supplemented by future studies.