Japan-China Issues “Inadvertently Benefit Korean Companies”

October 13, 2014

In an interview with Korean newspaper E Daily, Liu Jing, Associate Dean at CKGSB, talked about the strengths and weaknesses of the Chinese economy, as well as the benefits that Korean companies enjoy in the Chinese market.

“Chinese investment in Korea seems to have sharply increased because investment in Korea has so far been too small. While Korean corporates invested actively in China, China’s investment in Korea was relatively small. Also, the Chinese government’s regulations on overseas investment have been relaxed and Chinese foreign exchange reserves are increasing. Therefore, overseas investments, including those in Korea, are expected to keep growing”, said Liu Jing, Associate Dean of CKGSB.

Korean companies are actively entering the Chinese market and have been successful in China. That applies not just to tangible industries such as the automobile and home appliance sectors, but also to intangible cultural industries, including TV drama and music, which have been actively expanding into China. Korean companies entering into China have enjoyed several competitive advantages over other countries for the following reasons. First, the two countries have very similar cultural backgrounds. Also, the two nations’ close political ties and complementary economies work to their benefit. For example, Korea has world-class companies such as Samsung and Hyundai, as well as world-class technology. Since these are what China needs, Korean companies’ businesses in China tend to stand out. Furthermore, in the Chinese market, Korean and Japanese companies are in competition. Under this situation, if Japan and China have political conflict, then Korean companies will benefit by default. So Korean companies should make full use of this strength in the Chinese market.

The Chinese economy is currently going through structural changes. Over the past 30 years, the Chinese economy has tended to depend on overseas markets. Based mostly on manufacturing, it has created economic growth via investment. Furthermore, stable growth has come from the export-powered Chinese economy. However, this way of growth has reached a limit because the growth rate of developed countries, such as USA, Europe and Japan and other customers of the Chinese economy, is too slow. Therefore, the Chinese economy needs to switch to domestic consumption, which is a ‘consumer’-based structure. Domestically, the supplies in medicine, education, finance services and other service fields are relatively insufficient, so China is in the process of economic reform in order to address these problems.

To read the original article in Korean on the E Daily website, please click here.

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