Companies Seeking Future Opportunities in the 'Post-Corona' Era: "Still China"

Reviving Chinese Manufacturing "Now Is the Right Time for Contrarian Investment"
Hyundai Motor Group Quickly Invests in China, Shows Commitment to Expanding Hydrogen Industry Ecosystem

[Asia Economy Reporters Hyewon Kim, Soyeon Park, Changhwan Lee, Gimin Lee] As the global economy faces a rapid recession crisis due to the novel coronavirus disease (COVID-19), Korean companies are turning their attention to the Chinese market, where the manufacturing industry is recovering, in preparation for the 'post-COVID-19' era.

According to the National Bureau of Statistics of China on the 8th, China's Manufacturing Purchasing Managers' Index (PMI) for March rebounded sharply to 52.0 after hitting a record low of 35.7 in February. A PMI above 50 indicates an expansion phase in the economy. Accordingly, Korean companies have also made preemptive investments in China, anticipating the post-COVID-19 period.

The most proactive company is Hyundai Motor Group. With Chung Euisun, Hyundai Motor Group's Executive Vice Chairman, taking the chairmanship of the board and holding the group's highest decision-making authority, the group has chosen 'Miwodo China' as the first overseas stage to realize the hydrogen society vision because China is the largest market globally rapidly achieving the 'hydrogen rise (굴기, Gulgi).'

Hyundai Motor Group has set the management goal of fully commercializing hydrogen fuel cell system sales this year and leading the expansion of the hydrogen industry ecosystem. The establishment of the new hydrogen fuel cell system factory in Guangzhou, China, is part of this management strategy.

Despite being hit hard by the Terminal High Altitude Area Defense (THAAD) controversy and facing withdrawal risks from the Chinese market, Hyundai Motor Group is pushing forward with building a hydrogen fuel cell system factory, recognizing the market's unlimited growth potential.

Hyundai Motor Group's choice of Guangzhou, China, among various options is known to have been influenced by the local government's incentive policies. According to KOTRA, Guangzhou, which focuses policy support on fostering the hydrogen industry, offers comprehensive benefits such as settlement incentives up to 100 million yuan for hydrogen fuel cell-related investments, as well as support for research and development (R&D) costs and hydrogen charging station infrastructure.

Not only Hyundai Motor Group but also major large corporations (first movers) leading national competitiveness maintain the stance of continuing future investments in preparation for the 'post-COVID-19' era without stopping, although there may be some speed adjustments. In particular, there is a clear movement to turn crisis into opportunity through preemptive investments in China, which is rapidly recovering normalcy from COVID-19.

Battery companies, a new growth sector, are also increasing investments in China. SK Innovation completed a battery factory in Changzhou, China, at the end of last year. It is a production base with an annual capacity of 7.5 GWh, equivalent to about 150,000 electric vehicles.

SK Innovation also established a joint venture with China's EVE Energy last year to build a battery factory with a capacity of 20 to 25 GWh. The investment amounts are 579.9 billion KRW from SK Innovation and 525 million USD (about 620 billion KRW) from EVE Energy. The factory is planned to be located in Yancheng, Jiangsu Province, China.

LG Chem plans to invest a total of 1.2 trillion KRW within this year in its electric vehicle battery Plant 1 and small battery factory located in the Nanjing Xinjiekou Economic Development Zone in China. In addition to the Xinjiekou battery plant, LG Chem operates Electric Vehicle Battery Plant 2 in the neighboring Bingang Economic Development Zone. They plan to invest a total of 2.1 trillion KRW by 2023 to establish an annual production capacity of more than 500,000 electric vehicles.

The construction machinery market, considered a 'barometer' of China's infrastructure economy, is showing a clear recovery trend. This is due to the Chinese government's new infrastructure investment policies and increased fiscal spending to overcome COVID-19. In line with this, Doosan Infracore swiftly secured an order for 32 units of 22-ton medium-sized excavators from two large infrastructure construction companies in Jilin Province, China.

A Doosan Infracore official said, "Demand in the Chinese market, which had slowed down for about two months at the beginning of the year, is normalizing," adding, "The industry expects the market's peak season to fully kick off in April and May."

Samsung Electronics and LG Electronics are also gradually normalizing their businesses in China. The operating rates of production plants in major cities have recovered to pre-COVID-19 levels, and most home appliance stores have resumed operations.

A senior business official said, "The phrase 'Miwodo China' fits perfectly. Companies cannot give up the huge Chinese domestic market," adding, "Although China's policy to protect domestic companies has strengthened amid COVID-19, local governments are pouring out numerous incentives to attract foreign investment to stimulate the economy. It seems that now is considered the right time for contrarian investment."

This content was produced with the assistance of AI translation services.