9.6% of South Korean Companies in China Considering Leaving

The Korea Institute for Industrial Economics and Trade recently conducted a survey on 406 South Korean companies in China and announced on Jan. 4 that about 10 percent of them are considering leaving China as the Chinese economy is slowing down, labor costs are rising and competition is intensifying.

More than 45 percent of them said that their sales decreased in 2021 and more than 58 percent said that their sales are likely to have decreased in 2022. Only 27.3 percent and 14.5 percent said that their sales increased in 2021 and 2022, respectively. In addition, 62.1 percent mentioned a decrease in profit in 2022 whereas only 11.5 percent mentioned an increase in profit in 2022.

Two-thirds of the respondents said their business in China would not improve for two to three years to come and 21.4 percent said it would shrink in that period. The ratio of those considering leaving rose from 2.7 percent to 9.6 percent in two years.

Meanwhile, some of them said their sales and profits in China are increasing and they will expand business there. According to the institute, these companies successfully localized themselves and are benefiting from an increase in local demand caused by U.S.-China rivalry.

South Korean companies’ localization in China is accelerating although doing business there is not as attractive as before. According to the survey, the ratio of those locally procuring raw and subsidiary materials rose from 65.8 percent to 71.3 percent in two years and the ratio of those selling their products to Chinese companies rose from 31.5 percent to 38.5 percent in that period.