South Korea! Leave China behind and Advance on India & SEA

Korean companies must challenge new the business world order to survive. South Korea has a strong domestic economy and has some of the leading technology companies.

Now, previous success won’t guarantee success in the future. We are expecting a generation that will have the ability to create new and shiny things.

There is no longer continuous growth in this new era, even for major companies like Samsung or other leading Korean companies

The US-China trade deal has broken down and G2 is standing off by imposing duties each other. US maintains its stance on China, by claiming that China should stop extortion of IPs, compulsory technology transfer and provision of government’s subsidies as it provokes unfair competitions with other nations.

When the Japanese government finally nationalized Senkaku Islands which had been embroiled in a territorial dispute 2012, violent anti-Japanese protests broke out in China. As a result, losses of Japanese firms in China amounted to over U$100 million and Japan’s export to Chine quickly dropped by U$6,758 million. In consequence, Korea topped the market share of imported goods in China, beating out Japan.

Thereupon, the Japanese government immediately prepared multilateral countermeasures such as compensation of goods and services, numerous inducements from the central government and development of alternative markets. Some firms withdrew their investments from China and chose to transfer business to SEA or return to their homeland. Irrespective of China’s anti-Japanese sentiments, Japanese firms clenched their tooth and attacked the China market more meticulously.

Firms of Korea, Japan and Taiwan have extended their existences in South-Eastern Asia markets to reduce its dependence on the China market for the last few years.

Since Korea and US decided to deploy the THAAD in the Korean peninsula, Chinese authorities took retaliatory measures including no chartered flights to Korea, no subsidies for vehicles equipped with Korean batteries, and business suspension against Lotte Mart, following a ban on the Korean Wave.

Now time has come for Korean firms to accelerate its advance on ASEAN nations with 630 million populations and India having world-top populations in 7 years. Korean firms had already started the investment into SEA nations a few years ago and Korea’s ODI into ASEAN nations surpassed that into China as of 2014.

The nation most invested by Korean firms is Vietnam. Korean firms’ entry into Vietnam is expanding up to every field of industries such as electronics, steel, construction, and services including finance, law, etc. 

Lotte, the worst victim of a THAAD conflict between Korea and China is also a representative firm knocking on the Vietnam market. Lotte is strengthening its marketing focusing on a middle class of Vietnam which shows an outburst recently. Hence, now is the best time for firms to launch a project which aims to extend the export market of Korea to SEA. Korea needs to devote all one’s energy to developing the market in Singapore, Thailand, Vietnam, Cambodia, Indonesia, Malaysia and Myanmar.

Let’s advance on South Asia including India, Sri Lanka and Bangladesh. 

Korea must learn lessons from Japan and Taiwan having experienced China’s economic retaliation earlier.

When a territorial conflict with Japan over Senkaku Islands became an issue 2010, China gave economic retaliation such as an embargo on rare-earth resources, rare metals essential for electronic devices. China also reined back Chinese tourism to Japan and investigated Toyota Motor for the bribery charge. When the Japanese government declared nationalization of Senkaku Islands 2012, China even launched the boycott campaign against Japanese products. Those events served as a momentum for multinational corporations of Japan to migrate to SEA.

Japanese firms began to move their production bases in China to SEA.

For Taiwan, China imposed economic sanctions such as a ban on Chinese tourism to Taiwan as soon as Tsai Ing Wen; a presidential candidate won the election.

It was reported that the number of Chinese tourists to Taiwan had decreased by 55% compared to the previous year.

Taiwan also paid attention to SEA. Taiwan made a lot of effort into development of new markets, introducing a visa waiver program for the Thai, etc. 

The ratio of Taiwan’s ODI into China once reached 84%, but presently it has dropped to 51%. On the contrary, the ratio of Taiwan’s ODI into SEA has doubled during 2011~2015. Now, the ratio is 15%, having jumped from only 6% during 2006~2010.

Here are few serious questions to ask to Korean firms having entered into China.

Has China accomplished the satisfactory national interest that it expected, through economic retaliation on Korean firms?

Has China truly advocated Korean firms’ interest as a partner?

Has China, as a partner, truly protected those technologies given by Korean firms?

Now, Korean Fleets! Leave China behind and Advance on India & SEA!

Sun Moo Kim
Sun Moo Kim
Korea IT Times Columnist