China-Japan row may benefit Korea

By Park Si-soo

The escalating China-Japan territorial dispute over an island claimed by both countries is an opportunity for Korean electronics and car companies to bolster their presence in the Chinese market, analysts said Thursday.

They said Korea’s major exporters to China, including Samsung Electronics, LG Electronics and Hyundai Motor, will see sales jump in the world’s largest market amid a widespread boycott of Japanese products there. In the short term, they added, Korea’s tourism industry will gain more visitors from Beijing.

China is a battleground for companies based in Seoul and Tokyo where they have employed various marketing activities to lure 1.3 billion potential customers. Competition between the two over mid-priced products is fierce, while Japanese firms have taken the upper hand in the premium market.

Yet the dispute is increasingly denting the loyalty of Chinese consumers to Japanese brands. In a recent survey of 20,000 people by Chinese state broadcaster CCTV, 90 percent of them said they will stop buying Japanese goods.

Since the flare-up of the dispute in August, Japan’s leading electronic giants such as Toshiba, Panasonic and Sharp have experienced a double-digit decrease in sales.

“We expect the sales of Samsung Electronics and LG Electronics to increase in China’s premium market,” said Cho Sun-joo, a researcher at Korea Investment and Securities. “Though it’s uncertain how much impact the ongoing event will have on the market, it should be good news.”

According to Shinhan Investment, Chinese brands occupy 57 percent of the Chinese TV market, followed by Japanese brands with 23 percent, Samsung with 7, and LG with 4.

Another researcher Lee Hun-young echoed the view, saying Korean automakers will also benefit from the diplomatic impasse. The combined market share of Hyundai and Kia in the Chinese auto market is roughly 9 percent, while that of Japanese brands is considerably higher, particularly in the premium car market.

“Japanese carmakers are known to have seen their market share in China fall by two percent last month, while Korean vehicles posted a 13 percent rise for the same month,” Lee said.

Analysts said a suspension of operations by Japanese firms of their plants in China is another favorable factor. Leading Japanese firms, including Panasonic, Canon, Honda and Nissan have suspended operations at plants in China after mass anti-Japan protests and the stoppage is likely to continue “for the time being” with no immediate sign of the dispute being settled, industry insiders said.

“Hyundai’s mid-sized sedan Avante is quickly gaining popularity. I think the declining sales of Japanese vehicles as a result of the territorial dispute will be good news to Hyundai,” said Lee Jung-do, an analyst at Shinhan Investment.

Tourism experts said the country’s tourism industry should be another beneficiary, expecting an increase in Chinese travelers to Korea during China’s biggest holiday that lasts from Sept. 30 to Oct. 7. They expect a sharp rise in hotel bookings and increased sales at duty free stores during the period.

The Korea Tourism Organization said more than 100,000 Chinese people will come here during the holiday.

“Korea has long been on a par with Japan when it comes to identifying a favorite travel destination among Chinese people due to geographical proximity.

For this year, however, more Chinese people are believed to have chosen Korea due to the dispute,” said Jeon Jong-kyu, a researcher at Samsung Securities. “An influx of Chinese travelers will boost sales at hotels, duty free shops and of cosmetic products. Foreigner-only casinos here may be another business to be affected.”

Lotte, the country’s largest duty free shop brand, said sales of domestic products have risen 40 percent compared to a year earlier thanks largely to lavish spending by Chinese shoppers.