"While Global 'Mega M&A' Increases After US-China Conflict, South Korea Stagnates"

KCCI Analysis... "Only 1 Case Since 2016, Virtually None"

An employee is organizing US dollar and Chinese yuan bills at the KEB Hana Bank Counterfeit Response Center in Euljiro, Seoul. Photo by Moon Honam munonam@

[Asia Economy Reporter Park Sun-mi] Despite the ongoing US-China conflict, global mega M&A (mergers and acquisitions) steadily increased, but South Korea showed poor performance, according to a recent investigation.

According to the report "Recent Characteristics and Implications of Global Foreign Direct Investment (FDI)" released by the Korea Chamber of Commerce and Industry on the 17th, South Korea had only one mega M&A since 2016. The Chamber evaluated this as "virtually nonexistent." While South Korean companies' mega M&A stagnated, the global share of mega M&A expanded from 29.9% in 2011 to 39.7% last year. The number of cases increased about 2.8 times from 69 to 197. This was influenced by steady increases in mega M&A in major countries such as the US (4.2%p), China (28.4%p), and Germany (29.1%p). Mega M&A refers to M&A deals exceeding $5 billion (approximately 6 trillion KRW) per investment.

Foreign investors' investment in South Korea was also found to be low. According to the 'Greenfield FDI' survey, which examines foreign capital purchasing land in the host country to build factories, South Korea's figures decreased by 32.6% after the US-China conflict compared to before. The survey calculated the average for three years before and after March 2018, when the US-China trade war ignited. During the same period, emerging Asian countries such as India (-28.7%) and ASEAN (-12.3%) also experienced significant declines. These figures were lower than the global average of 5.6%.

On the other hand, advanced countries such as the European Union (EU) (47%) and Japan (12.1%) benefited, and even the US (5.7%) and China (13.5%) saw increases. Professor Lee Moon-hyung of Soongsil University's Department of Global Trade analyzed, "The EU is promoting supply chain restructuring and industrial competitiveness enhancement through measures such as the Carbon Border Adjustment Mechanism (CBAM). As seen in recent investment cases by Intel and SK Group, major global companies show a preference for investing in the EU or advanced countries, which are relatively less affected by the US-China conflict."

The reinvestment rate of FDI investors in South Korea was also not high. An analysis of FDI profit reinvestment rates over eight years from 2013 to 2020 showed South Korea at 24.7%, which is 10.3%p lower than the OECD average of 35%. The US (51.3%) and Canada (38.1%) exceeded the OECD average. Chile (32.5%) was also higher than South Korea. Narrowing down to the three years before and after the US-China conflict, South Korea's average dropped from 44.8% to 32.1%, a decline of over 10%p, while the OECD average rose from 36.5% to 40.3%, an increase of 3.8%p. During the same period, the US and Germany increased by 4.7%p and 4.4%p, respectively.

Lee Sung-woo, head of the International Trade Division at the Korea Chamber of Commerce and Industry, emphasized, "As the global FDI structure changes due to the US-China conflict and prolonged COVID-19, competition to restructure supply chains for advanced materials and components will intensify. We must actively foster new industries based on green and digital New Deal policies and boldly abolish various overseas funding regulations in South Korea to facilitate mega M&A."

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