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| Container ships dock in Korea's southeastern port city of Busan in this undated file photo. Yonhap |
By Lee Min-hyung
Korean companies are on track to reduce reliance on China and increase investment in other Asian markets, in attempts to minimize potential losses from the escalating hegemonic struggle between the U.S. and the world's second-largest economy.
Industry watchers and experts said Korean firms have no choice but to adopt a long-term exit strategy from China and gradually cut huge export reliance on the country, as the global hegemonic conflict is showing little sign of abating as Beijing moves toward a closed economy.
Recent data from Seoul's trade ministry also showed that the number of Korean firms that established new branches in China fell by 12.1 percent to 87 during the first half of this year from the previous year. The figure in the Japanese market soared to 118 during the same period.
This marked the first time since 1989 that the number in Japan outpaced that of China.
"China and Hong Kong account for 33 percent of Korea's total exports, which far exceeds the global average of 15 percent," said Kim Dae-jong, professor of business administration at Sejong University.
"It is natural for more Korean firms to turn to other Asian markets such as Japan and Vietnam as China's recent political gesture displays an apparent sign of its return to the closed economy. Big Korean conglomerates, including Shinsegae and Lotte, also withdrew their retail businesses there, and smaller firms also have fewer incentives to expand there."
It is high time for Korea to reshape its export strategy and focus on other Asian markets, according to the professor, as China is unlikely to shift its political stance any time soon.
Kim Moon-tae, head of an industry policy division at the Korea Chamber of Commerce and Industry, said fewer Korean firms will choose to increase investment in China, as they have witnessed escalating management uncertainties in China after its COVID-19 lockdowns.
"Even after the end of the pandemic, China is moving to challenge U.S. hegemony," he said. "It's not just Korean firms adopting an exit strategy there. Other foreign firms are also taking a similar strategy and choosing other alternatives in places such as Hong Kong, Singapore and Japan."
As the U.S. introduces stricter rules against products made in China, a number of Korean big tech conglomerates cannot increase their investment there, he pointed out.
"For now, we do not have any other options but to look for other Asian markets," he said. "For instance, more Korean firms appear to be seeking new opportunities in Japan, jumping on the recent thawing of political tension between Seoul and Tokyo."
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