Korean media: Unusual, they "quietly visited Chinese" companies | South Korea | China

In recent times, executives from several heavyweight foreign companies have visited China one after another, including Tesla, JPMorgan Chase, Apple, General Motors, Pfizer, BMW, Mercedes Benz, Qualcomm, Starbucks, and others. No wonder some foreign media lament that "big bosses are constantly moving in China.".

In contrast, major South Korean companies within reach appear relatively low-key. The Korean National Daily recently found that only SK Group President Choi Tae yuan and Samsung Electronics President Lee Jae yong have visited China since the beginning of this year after reviewing the public itinerary of leaders of major South Korean companies. The report stated that the two of them went "quietly" and did not make many public appearances. They did not even go to their own factory located in China, which is usually unbelievable.

▲ Screenshot of the report from the Korean Ethnic Daily

The Korean National Daily believes that this move by executives of large South Korean companies may be based on strategic judgment of the conflict between China and the United States. Faced with pressure from the United States to demand that South Korea choose sides, South Korean companies seem to be restraining foreign activities that may stimulate the United States. Korean companies don't want to miss out on the huge market in China, but they can only act according to the eyes of the United States, which makes them very distressed. On the other hand, the South Korean government's foreign policy shift is too obvious, which has also raised more concerns among entrepreneurs.

▲ Li Zairong

Although these large South Korean companies are cautious, it is an undeniable fact that South Korea's exports to China have been declining all the way. According to data released by the South Korean Ministry of Industry, Trade, and Resources on June 6th, South Korea's exports to China have decreased for 12 consecutive months since June last year. In the past year, except for September, there has been a trade deficit with China in all other months. The department's data also shows that South Korea had a trade surplus of $7.2 billion with the United States in the first quarter of this year, making the United States the largest trade surplus country in South Korea. Coincidentally, the Korea Trade Association released a report on June 5th stating that although South Korea's exports to China continue to decline, the overall export market is showing a trend of diversification.

Is it true that "the east is not bright, the west is bright", and South Korea has regained the market it lost in China from the United States? The fact may not be so. According to the South Korean government's "May Import and Export Trends", South Korean exports decreased by 15.2% year-on-year in May, and trade balance has been in deficit for 15 months. The monthly exports have been declining for 8 consecutive months, with all exports to the six major destinations of China, the United States, ASEAN, the European Union, Latin America, and the Middle East decreasing.

That is to say, not only trade with China, but also the overall scale of South Korea's foreign trade is shrinking. In its report "The End of the Second Globalization and the Korean Economy" published on May 25th, the Korea Industry Research Institute analyzed that after the 2008 global financial crisis, the growth of trade volume as a proportion of global GDP showed a downward trend, leading to the end of South Korea's export-led growth.

As is well known, South Korea has a small land area and lacks an economic hinterland. The export-oriented development model has supported South Korea's economic growth for decades, especially with China's trade occupying an important position. Senior journalist Han Youde from South Korea's Central Daily News wrote in a column article that over the past 30 years, the trade relationship between South Korea and China has been "sweet", and China's economic growth has been a blessing for the South Korean economy, thanks to "intermediate material trade": South Korea manufactures components and exports them to China, which are then assembled into final products by Chinese factories. Finally, finished products printed with "Made in China" are sold to the United States at low prices, and South Korea, China, and the United States are all winners.

This was originally a chain that benefited multiple parties, but due to the trade war initiated by the United States against China, the global supply chain is being distorted or disintegrated, and South Korea, located in the middle of this chain, appears somewhat powerless. Han Youde wrote that China is striving to build a "red supply chain" that can complete production processes domestically in order to reduce risks, which has narrowed the gap for Korean intermediate products to penetrate the Chinese market. There are comments in the South Korean industry that South Korea's trade with China is now limited to semiconductors.

In April of this year, during a visit to the United States, South Korea's Deputy Prime Minister of Economy and Minister of Planning and Finance, Chou Kyung ho, responded to media inquiries about whether weak exports from South Korea to China would become the norm. Chou Kyung ho believed that "there will be no sustained deficit", but that the era of large-scale surplus has come to an end. On June 8th, the South Korean "Asia Daily" also lamented in its report that "the era of South Korea's export dividend to China has come to an end.".

It seems that the senior officials in South Korea are relatively optimistic, but many Korean scholars hold a pessimistic view. Jiang Douyong, Senior Research Member of the Korea Industry Research Institute, believes that the trade proportion between South Korea and the United States and China is relatively high, and the proportion of intermediate product exports is relatively high. If the contradiction between China and the United States leads to the decoupling of the world economy, the stagnation of South Korea's economy and trade will further accelerate. According to the National Future Strategy Institute of Seoul University, supply chain issues have become the biggest risk factor for the South Korean economy. Without thorough trade and industrial restructuring that has been stalled for more than a decade due to the semiconductor illusion effect, the future of the South Korean economy will be difficult to achieve.

Some South Korean intellectuals have also voiced their desire for self-improvement and self-reliance. Kim Kwai hwan, the Minister of Industry and Commerce Research at the Korea Industry Research Institute, said that both domestically and internationally, the United States has realized that it is impossible to completely "decouple" from China, and Korean entrepreneurs do not need to be too timid. Professor Kim Ryong hee of the Department of Economics and Finance at Daegu University stated that Korean companies should not narrow their scope of activities, not because of or for the United States, but rather from the perspective of South Korea, and strive to find guidelines for the extent to which their relationship with China has developed.

How to crack the saying "it's difficult to make a small difference between two big companies"? The answer is: not to be a vassal of a great power. China and South Korea are inseparable neighbors and partners that cannot be separated. Moreover, China has always developed economic and trade relations with South Korea on the basis of equality and mutual benefit, and has never coerced South Korea to take sides like the United States. Believing that rational Korean companies will have their own judgments.