Domestic Enterprises Preparing Against Deflation of China

As the signs of deflation have been shown owing to a consumption depression in China, experts indicated the rapid measures of Korean enterprises.

Korea Trade-Investment Promotion Agency (KOTRA) presented five changes such as △Acceleration of trade-related legislation, △Steep raise of exports, △Sharp increase of foreigners’ investment, △Deepening of supply excess, and △extension of China funding, in a report of ‘Evaluations and Measures of China’s 1 year accession at WTO’ published on December 1. China acceded to WTO on November 11, 2001.

In particular, Korean enterprises must pay attention to a strengthening of trade restriction. The report analyzed that out of 1,500 laws which were effective in the year and 2,700 regulations which were revised during the preparation process of WTO accession of China, large parts have directly influenced on the China trade and investment of Korean enterprises such as Anti-dumping Practice, category of foreigners’ investment industries.

The report also prospected that the overall economic scale has been larger but the deflation will be continued for coming five years as the consumption have continued to decreased owing to the system conversion. In such the supply excess, Korean enterprises do not need to increase the weight of domestic sales in China, but need to have strategies to control a rate of domestic demands in China and exports to other countries. The trend of the private funds will be the key to recover the consumption economy because there are increasing savings against the demand of future funds.

KOTRA counted five long term flows to determine the future China market except five changes, such as △ sharp increase of private enterprises, △Spread of high price structure, △Deepening of corporate competitions, △Decrease of Human relationship influence, and △increasing foreign advance of Chinese enterprises. In particular, the increase rate of employees’ wage which will be larger than 20% each year and increase of holidays based on the execution of long-term holidays system, became the main factors which Korean enterprises must care about.

Park Han-Jin, chief of foreign investigation team, KOTRA said, “Korean enterprises which are interested in the China advance in the future need strategies to have the partnership with private companies. Also, they have to grasp the economic regulations thoroughly through Internet site of the Embassy of the Republic of Korea (koreaemb.org.cn) during the week before the export and improvement to China.

Mi-Kyung Jung mickey@donga.com