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Thu, February 2, 2023 | 18:19
Business
Korean exporters cringe at rising trade barriers in China
Posted : 2016-02-01 13:45
Updated : 2016-02-01 13:45
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By Choi Sung-jin

When trade volume between two countries grows, so does trade friction. Korea and China are no exceptions.

The Chinese government has decided not to subsidize nickel-cobalt-manganese (NCM) batteries produced by Korean companies such as LG Chemical and Samsung SDI, for electric buses, industry sources said Sunday.


Officials in Beijing say the move reflects their safety concerns about the NCM batteries, but Korean manufacturers are not hiding their discomfort with what they see as a "protectionist" policy that runs squarely counter to global trends.

Chinese officials cited a recent series of explosions of NCM batteries as the reason for their decision, instead deciding to pay subsidies only for lithium ferric phosphate (LFP) batteries mostly made by Chinese companies.

NCM batteries, which have a far higher energy density than LFP, are dominated by Korean companies like LG Chemical and Samsung SDI. As well, Japan's Panasonic also manufactures electric buses powered by NCM batteries. The main problem with NCM batteries is they require packaging technology to control temperature or they risk exploding, the sources said.

The NCM batteries that exploded were shoddy products of Chinese firms lacking this technology, they said. LG and Samsung officials claimed that their products have never been involved in such an accident.

The sources suspect the Chinese government of making excuses for trade protectionism. "Beijing's latest move apparently has some political motivations," said a foreign investment bank. "All reported explosions were by LFP batteries made by Chinese companies."

An industry executive noted that BYD, China's biggest electric bus maker, uses LFP batteries. "As Hyundai Motor exerts influence on Korea's industrial policy, BYD seems to have conveyed its opinions to the Beijing government," he said.

It is difficult to raise questions openly about the protectionist move, because the Chinese government could introduce additional measures if foreign firms upset it. This is also why Apple is refraining from taking issue with Xiaomi's infringement on its intellectual property rights, they said. Beijing has also raised import duties on LCD panels to protect the domestic industry.

LG and Samsung will likely see their sales drop sharply and operating losses rise, the sources said. "China, along with North America and Europe, is one of the three major markets of electric cars, which account for more than 30 percent of the Korean battery makers' performance," industry official said.

In a related development, the Chinese government has also begun to impose taxes on the export of natural resources for which Korea's industry has no substitutes, officials said.

"Because of Beijing's export taxes on natural resources, Korean companies have lost their import sources or bear much of the burden resulting from such taxes," said an official at the Beijing office of the Korea International Trade Association (KITA) Sunday.

The Chinese government recently decided to charge export taxes of a maximum 40 percent on outbound shipments of 200 different items, including scrap metal. Korea imports 9 million tons of scrap a year, but only 10,000 tons from China. "Without an export tax, Chinese scrap metal would be quite competitive," an industry source said.

Most of the items slapped by the export tax are mineral resources, which Korea cannot not produce or substitute. "The export tax hurts the competitiveness of Korean companies that need such resources, which means the Seoul government should tackle the matter with urgency," he said.

In 2014, the World Trade Organization did not recognize the Chinese government's assertion that its export restrictions on rare earth elements were for environmental purposes, concluding it is an act of unfair trade.

"Korean companies that have imported items hit by the export tax will have to readjust prices or divert import sources," said Choi Yong-min, head of KITA's Beijing chapter. "For a more fundamental solution of the matter, however, they should regard it as a trade barrier, and call on Beijing to scrap or minimize the export tax."

Emailchoisj@ktimes.com Article ListMore articles by this reporter
 
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