Korean Companies Struggle Under China's Strict Quarantine Policies... 88% Report Lockdown-Related Losses

Martial Arts Sangha Branch in Shanghai and Zhejiang, Survey of 177 Korean Companies in China

[Asia Economy Reporter Park Sun-mi] A recent survey revealed that 9 out of 10 Korean companies (88.1%) operating in China have suffered damages due to local COVID-19 prevention policies, highlighting the need for measures to minimize these impacts.

On the 27th, the Shanghai branch of the Korea International Trade Association conducted a survey of 177 Korean companies in China regarding the damages caused by lockdowns in major areas such as Shanghai. The results showed that 88.1% of respondents reported "damage or negative impact on business operations." Additionally, 97.4% of companies responded that their sales decreased in the first half of this year, with 31.4% of those experiencing a sales decline exceeding 50% compared to the same period last year. Furthermore, 95.5% of respondents forecast that sales declines will continue into the second half of this year.

The proportion of companies reporting decreased investment and employment in the first half was 69.9% and 66.7%, respectively, but these figures rose to 70.5% and 67.3% for expected damages in the second half. The report predicted, "The damage in investment and employment sectors will worsen over time."

The main difficulties caused by China’s stringent prevention policies were identified as "movement restrictions (16.8%)," "limitations on sales and marketing activities (16.8%)," and "logistics and supply chain disruptions (15.9%)," indicating significant challenges in offline activities.

When asked about the degree of business normalization after lockdowns were lifted, 41.5% of companies responded "50% or less," and 22.4% said "30% or less." However, there was a significant gap between manufacturing and non-manufacturing sectors in the speed of business normalization: 68.3% of manufacturing companies reported achieving "70% or more" normalization, compared to only 28.3% of non-manufacturing companies, showing more than double the difference. The report noted, "Even after the lockdown was lifted, Shanghai continues to restrict face-to-face customer services, and there are still many inconveniences in movement, so business normalization in the non-manufacturing sector will take some time."

Regarding future business plans in China, more than half (55.3%) of companies said they are considering "business reduction, suspension, withdrawal, or relocation." In contrast, 35.9% plan to "maintain existing business plans," and only 7.3% intend to "expand business." Companies expressed hopes that the Chinese government will improve predictability of prevention policies and provide support such as subsidies, tax reductions, and rent discounts.

Shin Sun-young, head of the Korea International Trade Association’s Shanghai branch, stated, "To revitalize economic exchanges between the two countries, our government and related agencies need to inform the Chinese government about the damages faced by our companies and urge support for these damages." She added, "Since most foreign-invested companies, not just Korean ones, are experiencing similar difficulties and damages, it would be a good approach for foreign-invested companies in China to jointly address these issues."

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