[Beijing Diary] Talchung, If You Cannot Avoid It, Study It

"Korean companies are really withdrawing in large numbers. It is even uncertain whether we can continue conducting this survey in the future."

This is what Kim Jae-deok, head of the Beijing branch of the Korea Institute for Industrial Economics and Trade, said while presenting research findings on the "Recent Management Status of Korean Companies Entering China" at a recent event held in Beijing, China. Out of a population of about 15,000 companies, they survey 500 companies annually regarding their local business status and future prospects in China. However, due to companies rapidly withdrawing from the market, there is doubt about whether the survey can be sustained. Regardless of the survey's purpose, many companies tend to be reluctant or outright refuse to participate if their management situation or business conditions are poor.

[Image source=Reuters Yonhap News]

The Korea-China relationship, which rapidly deteriorated from 2016 due to the Terminal High Altitude Area Defense (THAAD) issue, has hit rock bottom recently as Korea-US relations have become closer than ever. Companies that once flooded into China riding the Korean Wave and product competitiveness, along with subcontractors that grew their businesses following them, now find it difficult to maintain their strength. They are responding by partially shutting down factory equipment or operating some production lines with local companies' products, but the situation remains unfavorable. According to the management status survey results, 12.4% of the 500 respondent companies plan to withdraw their business within five years. This means that one out of every eight companies currently in China has decided to leave the market within five years.

Changes in international affairs and growth potential are always in flux, and it is difficult to reverse trends through individual efforts of private companies. It is also true that major adverse factors such as business uncertainty, competition with local companies, and demand changes due to worsening US-China relations are unlikely to be resolved in the short term.

What is needed in such times is a clear understanding and diagnosis of the current situation where 탈(脫) China is rapidly progressing. The Korean government does not even properly grasp how many companies are established in China, let alone the status of companies withdrawing. Kim also explained, "When looking at overseas investment data, we know about companies entering (expanding) but do not investigate companies leaving," adding, "This is regrettable." He further emphasized, "There is a need to establish a method to continuously monitor and analyze the situation."

Meanwhile, an expo themed around "supply chains" will be held for the first time in Beijing on the 28th. American companies such as Apple, Tesla, and Amazon will set up booths in large numbers to reaffirm their membership in the supply chain. Korea will have some small and medium-sized enterprises participating, but major companies like Samsung, Hyundai Motor, LG, SK, and POSCO did not register as participants. According to a source, the application period for companies coincided with April-May, when Korea-China relations rapidly cooled due to President Yoon Suk-yeol's remarks on Taiwan. There is also talk that companies missed the application period due to cautiousness.

Companies may withdraw from the Chinese market or choose not to participate in the supply chain expo. However, such decisions should not be based on feelings of favor or disfavor toward China or cautiousness but should be strategic choices made after thoroughly weighing the pros and cons.

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