Korean companies are actively pursuing strategies to reduce their dependence on China and increase investments in other Asian markets. This shift aims to minimize potential risks arising from the ongoing power struggle between the United States and China, The Korea Times reports.
Industry experts and observers emphasize that Korean firms are compelled to establish long-term exit plans from China and reduce their heavy reliance on Chinese exports. The global power rivalry shows no signs of de-escalation, with China moving towards a more closed economic system.
Data from South Korea's trade ministry reveals a 12.1% decrease in the number of Korean companies establishing new branches in China during the first half of the year, dropping to 87 from the previous year. In contrast, the number of Korean firms entering the Japanese market surged to 118 during the same period, surpassing China for the first time since 1989.
Kim Dae-jong, a professor of business administration at Sejong University, notes that China and Hong Kong currently account for 33% of South Korea's total exports, significantly higher than the global average of 15%. He underscores the need for Korean companies to explore alternative Asian markets like Japan and Vietnam due to China's shift towards a closed economy. Major Korean conglomerates such as Shinsegae and Lotte have already withdrawn their retail operations from China, and smaller firms are also losing incentives to expand there.
Kim Moon-tae, the head of an industry policy division at the Korea Chamber of Commerce and Industry, predicts that fewer Korean firms will choose to increase their investments in China due to escalating uncertainties in the country, amplified by the COVID-19 lockdowns and China's challenge to U.S. hegemony. Many foreign firms are adopting similar strategies, seeking alternative destinations such as Hong Kong, Singapore, and Japan.
Stricter U.S. regulations targeting products made in China are limiting the ability of Korean tech giants to expand their investments there. In response, Korean companies are increasingly exploring opportunities in Japan, encouraged by the recent thaw in political tensions between Seoul and Tokyo.
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