Foreign Capital Effects: Chinese Investment in Jeju Not Bringing Consumption, Employment to Region | BusinessKorea

Tuesday, March 20, 2018

Cheonjiyeon Waterfall on Jeju Island is an example of the island's natural beauty. (Photo by Douglas Knisely via Wikimedia Commons)
Cheonjiyeon Waterfall on Jeju Island is an example of the island's natural beauty. (Photo by Douglas Knisely via Wikimedia Commons)
29 August 2014 - 3:25pm

The Bai Tong Sinwon Resort is a 243.2 billion won (US$239 million) development by the Bai Tong Group, a Chinese real estate developing company, at Namwon-eup, Seogwipo City. The development started to cause controversy from the urban management planning approval stage in 2012, because the resort is to be located at an altitude of 300 to 400 m, which has traditionally been a protected natural environment on Jeju Island. Nevertheless, Bai Tong Sinwon Resort has been designated as a Foreign Investment Zone and received a lot of corporate and income tax benefits. Currently, phase one of the construction is underway.

There are increasing side effects of Chinese investors buying up Jeju. Together with the worries over sprawling development, there are also concerns that Chinese investors will “eat and run,” meaning that they will receive tax benefits and permanent residency in Korea but send all their profits back to their home country.

Investment fever in Jeju started from the real estate investment immigration system that became effective in 2010. The real estate investment immigration system provides a five year residence visa for foreigners who purchase leisure condos worth over 500 million won (US$492,640) located in business areas under development at 100,000 m2 in size permitted by the Governor of Jeju Island. Permanent residency is also provided after construction is completed. According to Jeju Special Self-Governing Province, a total of 1,020 cases of real estate investment immigration worth 860 billion won (US$847 million) have been recorded in the first half of this year alone.

Due to the increasing investments, real estate prices in Jeju Island are skyrocketing. According to the Ministry of Land, Infrastructure and Transport, the average land price in Jeju rose by 1.76 percent during the first half of this year alone. This was the second-highest rise among metropolitan cities and provinces in Korea, next to Sejong City with 2.79 percent.

The average apartment purchase price in Jeju was 141.78 million won (US$139,664) at the end of last year, but jumped 5.1 percent to 149.06 million won (US$146,910) by late July. As not only Chinese but also Koreans are investing in Jeju, the real estate market is heating up.

However, some are raising worries over the aftereffects of sprawling development in Jeju after the outflow of Chinese capital, as the majority of investments are currently casinos and condominiums. Especially in the midst of Chinese investment procedures, Jeju is not benefiting from any consumption or employment effects, which means there are hardly any benefits from all this foreign capital.

An employee at the investment policy department of the Jeju Provincial Government said, “Nobody expected that Chinese investments would come this fast. We are trying to come up with countermeasures for unexpected loopholes that popped up while inviting Chinese investments.”


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