Major Corporations' Chinese Subsidiaries' Sales 'Halved'... "Need to Revise China Trade Strategy" (Comprehensive)

Sale and liquidation involve 46 Chinese subsidiaries of major Korean conglomerates
KCCI: "Korea losing competitiveness in China... China grows in Korea"

Since 2016, when pressure from the Chinese government on Korean companies intensified, the sales of domestic conglomerates' Chinese subsidiaries have decreased by about 13% over six years. Excluding batteries and semiconductors, the sales decline reaches approximately 40%. This is why there are calls to revise the trade strategy with China.

On the 5th, CEO Score, a corporate data research institute, surveyed the sales of 113 companies among the top 500 domestic firms that disclosed the performance of their Chinese production subsidiaries over the past six years. It revealed that the combined sales last year amounted to 111.0424 trillion won, down 13.1% from 127.7292 trillion won in 2016. Excluding the relatively better-performing battery and semiconductor companies, the sales of large corporations' Chinese production subsidiaries last year were 73.4485 trillion won, shrinking 37.3% from 117.23 trillion won in 2016. Over the past six years, 46 Chinese production subsidiaries of domestic conglomerates were either sold or liquidated (30 sold, 16 liquidated).

CEO Score analyzed, "Since the implementation of the Hallyu ban (限韓令, restriction on Korean Wave) in 2016, which marked the start of sanctions against domestic companies, the ongoing complex crisis situations such as the US-China trade conflict, supply chain disruptions, and the Russia-Ukraine war have repeatedly caused major Korean companies' businesses in China to retreat."

Accordingly, there have been recommendations to expand the trade partner countries, which are concentrated in China and some other countries, to high-growth potential Indo-Pacific countries and Middle Eastern and African markets, and to diversify export products that are currently concentrated in a few items such as semiconductors. The Korea Chamber of Commerce and Industry (KCCI) pointed out in its report titled "Changes in the Global Trade Structure and Response Tasks" that Korea's current export structure is concentrated in a few countries, a few products, and mainly intermediate goods. Among the total exports of $683.6 billion last year, the top three export countries (China, the United States, and Vietnam) accounted for 48% ($326.5 billion).

The necessity of policies to establish and attract mother factories domestically was also raised. While China is strengthening its competitiveness in the Korean market, Korea is gradually losing competitiveness in the Chinese market. Korea's revealed comparative advantage (RCA) index in high-tech manufacturing for China rose 1.2 times from 1.19 in 1990 to 1.42 in 2020, but China's RCA for Korea in high-tech manufacturing increased 28.8 times from 0.05 to 1.44 during the same period. RCA is an indicator used to assess export competitiveness. An RCA above 1 means that the country has export competitiveness in that specific market segment.

KCCI urged, "The government should share the risks of investing in advanced technology fields that require enormous funds and implement policies to establish and attract mother factories domestically to maintain competitiveness." It added, "Government R&D investment, which is currently about one-third of private R&D investment, should be significantly increased, and the support system should move away from a top-down, rigid management structure led by the government."

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