Big South Korean companies are exiting China one after another. Business uncertainties are being fueled by fiercer competition and declining profitability in the Chinese market coupled with the U.S. government’s checks on China and policy changes by Chinese government authorities.
Lotte Chemical sold off its entire stake in Lotte Samgang Chemical, a joint venture with a Chinese chemical company, in 2023, according to the Financial Supervisory Service’s electronic disclosure system (DART) on March 14. It also disposed of its stake in Lotte Chemical Jiaxing selling cement and materials for detergents in China.
Korean petrochemical companies are becoming less competitive in China. This is because Chinese companies are waging a price war. They have been expanding on a large scale for several years. China used to be one of the largest importers of Korean petrochemicals but it is moving toward self-sufficiency. A slowdown in the growth of the Chinese economy has also reduced demand for petrochemical products in China.
The Korean battery industry is also reorganizing its Chinese business operations. LG Energy Solution sold off its stake in underperforming Jiangxi VL Battery in 2023. Jiangxi VL Battery is a small battery joint venture established by LG Chem with China’s Becken Technology in 2020.
Samsung SDI liquidated its Wuxi and Changchun battery pack corporations in China in 2022 and is focusing on its Xi’an plant that manufactures battery cells. Both Wuxi and Changchun plants have been showing poor business results. Since their inception, they have reportedly struggled to operate normally due to a combination of the Chinese government’s regulations and China’s retaliations against Korea over the deployment of the Terminal High Altitude Area Defense (THAAD) system.
Korean conglomerates sold off or liquidated 46 production subsidiaries in China since 2016 when China’s ban on the Korean Cultural Wave began in earnest, according to a survey in 2023 by CEO Score, a Korean enterprise data institute.
The situation is even worse in the Korean automotive industry. As Korean carmakers exited from China, related Korean companies that used to supply parts are following them. Hyundai Motor sold its Beijing Plant No. 1 in 2021, followed by its Chongqing plant in 2023. It plans to sell its Changzhou plant this year. Hyundai once operated more than five factories but is now running three only in China.
As Hyundai Motor has been shrinking the size of its business operations in China, Hyundai Steel, a supplier of automotive steel plates, has also been restructuring its local subsidiary and plant in China. HL Mando jettisoned its Chongqing subsidiary, which produced brakes and suspensions. Hyundai Glovis sold all of its stakes in Glovis Changzhou, which was established in 2023 with Changzhou Group, China’s largest private automobile sales and logistics company,.
Foreign investment in China hit its lowest level in 30 years in 2023 due to an exodus from China by not only Korean companies but global and multinational firms. Foreign direct investment (FDI) in China totaled US$33 billion in 2023, down 82 percent from 2022.