Chinese firms treble in a decade

By Kim Da-ye

The number of Chinese firms’ subsidiaries and overseas office operating in Korea tripled in a decade, according to the National Tax Service (NTS), implying the growing influence of the world’s second largest economy here.

As of 2009, the latest year that such data are available, 620 Chinese firms ― 107 branches and 513 subsidiaries ― were operating in Korea, up 175.6 percent from 225 ― 76 branches and 149 subsidiaries ― in 1999.

The growth rate outstripped the increase in the total number of foreign companies in Korea which rose by 108.7 percent to 9,075 ― 1,573 branches and 7,502 subsidiaries ― during the cited period.

When Hong Kong, a special administrative region of China, is included, the advance of Chinese firms to Korea is even more noticeable. The number of Hong Kong firms operating here rose to 370 from 145 a decade earlier.

Although the rate of growth speeds along, the Chinese business community remains much smaller than those of Korea’s long-term trade partners ― Japan and the U.S.

Japan had the highest number of branches and subsidiaries in Korea at 376 and 2,133 respectively in 2009, up from 237 and 1,160 in 1999.

U.S. firms had 385 branches and 1,624 subsidiaries in Korea, showing increases from 325 and 900 a decade earlier.

Foreign firms can enter Korea in two ways ― by setting up an independent subsidiary that does its accounting separately from the headquarters or opening a branch.

The largest portion of Chinese firms in Korea are involved in the wholesale and retail industry at 58.7 percent, followed by 13.4 percent in the manufacturing sector and 13.5 percent in the service sector.

Japanese businesses, in comparison, have a strong presence in the manufacturing sector with a 37 percent of 2,509 firms active in the category while more than 36 percent of American companies in Korea are involved in the service industry.

Meanwhile, China is the biggest investment destination for Korea in terms of the number of Korean companies operating there and the size of investments.

Korean businesses set up more than 21,600 subsidiaries and branches in China between 1968 and 2010, more than twice as many as the 10,429 in the U.S. and about ten times as many as the 2,308 in Vietnam and 2,033 in Japan, according to the Korea Exim Bank’s data quoted by the NTS.

Furthermore, the $31.3 billion in investments made in China by Korean firms between 1968 and 2010 represented 18.87 percent of the total. The amount is similar to the $30.3 billion funneled into the U.S. and significantly larger than the $5.7 billion and $3.1 billion invested in Vietnam and Japan respectively.

China is the largest trade partner for Korea with the trade volume having increased from $100.5 billion in 2005 to $188.3 billion in 2010 when Korea’s exports to China exceeded imports by $116.8 billion to $71.5 billion.