'No exit' in China
By Kim Jae-heun
AmorePacific CEO Suh Kyung-bae
While some big-name foreign companies that are active in China are considering reducing their business operations there due to the ongoing pandemic, South Korea's beauty giant AmorePacific plans to continue its investments in China with Beijing offering administrative and financial assistance.
AmorePacific said it has not changed its plans to continue the improvement of its manufacturing plant in Jiading District in the affluent Chinese city of Shanghai. The cosmetics giant will continue to produce smart beauty devices including Skin Light Therapy II there. That means Amore has no plans to relocate production abroad due to the pandemic.
"The Chinese market is important for us. Our revenue coming from China accounts for about 20 percent in total sales and this does not include money earned from the duty free sector. When we factor in sales from duty free shops, where our main customers are Chinese, our revenue coming from China could rise as high as 40 percent," an AmorePacific official said.
"We are currently operating one plant in China and that is in the Jiading District. It produces cosmetics products for Mamonde and Innisfree," the official added.
The plan comes after a recent joint survey by the American Chamber of Commerce in Beijing and Shanghai and the consultancy company of PricewaterhouseCoopers. They found U.S. firms in China are considering adjustments to their business strategy, while most of the respondents said that in the short term they would not move production, supply or procurement operations out of China.
In comparison, South Korean retail giants Lotte Mart and E-mart have begun or finished pulling out their operations in China mostly due to political tensions between the two countries. But the spread of COVID-19 in China, believed to be originated from Wuhan, made it hard for foreign investors to continue their businesses there.
Luxshare and GoerTek both of which manufacture wireless earphones for Apple at their plants in China, are planning to move their device production facilities to Vietnam. GoerTek has reportedly asked its cooperative firms if they can send materials needed to make earphones in Vietnam.
China is paying extra attention to retain foreign investors as keeping affluent foreign direct investment (FDI) could be interpreted as the country's successful management of the COVID-19 pandemic. FDI into mainland China fell 10.8 percent, year-on-year, in the first three months of this year influenced by the contagious virus. China plans to seek further opening-up and upgrading of foreign trade and investment, to offset the economic shock brought about by the pandemic.
AmorePacific is reacting to this. The company said it is confident about its Chinese operation as many of its outlets there have reopened. About 90 percent of stores selling the Korean firm's beauty products in China have temporarily closed due to the government's quarantine measures.
“The COVID-19 pandemic is settling down in China and we are expecting the local market to vitalize soon,” an AmorePacific official said. The National Health Commission of the People's Republic of China announced it will provide support measures for international firms.
The measures include shortening legal procedures for international corporate investments, strengthening of networks between foreign companies and local administrators, protecting intellectual property rights of foreign investors and providing the same right to participate in government project bidding.
AmorePacific entered the Chinese market in 1993 by establishing its branch in Shenyang. Now it operates over 1,800 stores selling items by the firm's brands such as Laneige, Sulwhasoo, Innisfree and Etude House.