Companies Reassess China Investment
By Ryu Jin
Staff Reporter
A South Korean company, which makes boilers in Jiangsu Province of China, has recently begun thinking about returning home, as the business environment there has gone from bad to worse due to toughening government regulations and decreasing incentives there.
With the Chinese government scrapping tax cuts for foreign enterprises and moving to oblige them to join the five major insurances, the company increasingly feels the need to come back to the home country.
Another South Korean company in Qingdao, Shandong Province, which manufactures kitchen utensils, has already been looking for a site in Busan or other cities in the southeastern area of the home country to relocate its plant in the world's most populous country.
According to a recent survey of about 580 South Korean companies operating in China, conducted by the Ministry of Maritime Affairs and Fisheries and KOTRA, one in every 10 South Korean firms in China is considering returning home in the face of worsening business environments.
Of the 145 companies that responded to the survey, 14 firms or 9.6 percent expressed intentions to relocate their bases or set up new factories in the home country.
The companies included four electric and electronics firms, two machine factories, one manufacturing transportation vehicles and one chemical firm, in addition to other companies producing furniture, paper and ceramics.
If certain conditions such as low land prices were met, they seemed highly likely to return home. Five of them, in particular, said that they want to come back ``anytime soon.''
One of the major concerns of the firms, which consider relocation, was the possible increase in costs, as China is scheduled to have a new labor law go into effect soon, a further burden for the firms in addition to recent wage hikes.
The law, which is set to take effect on Jan. 1, 2008, is intended to have foreign companies guarantee lifelong employment for those who have worked for a company for more than 10 years.
Many of the companies that consider relocation eyed Busan and Gwangyang with hopes that they could find a better business environment with lower land prices and cheap labor including foreign workers.
Officials from the Ministry of Maritime Affairs and Fisheries, which is in charge of the development and management of new industrial sites in such port cities as Busan and Gwangyang, plan to conduct on-site consultations for those companies this week.
``We're going to start work in earnest next week to find good sites for those companies,'' one of the officials said. ``The free trade zone in the Yulchon Industrial Complex in Gwangyang will be available from year-end or early next year.''
Vice Minister Lee Eun also said late last month that the government would guide the firms which intend to come from China to find new bases in the region of Gwangyang Bay before other companies.
``A growing number of companies are expected to return to the country if the land is provided at lower prices and the employment of foreign workers is expanded in the future,'' he said.
China was once called the ``land of opportunity.'' But, under the changing business environment, the expression is becoming a phrase of the old days for South Korean firms, which are trying to find better conditions.