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Is China Still a “Land Of Opportunity?”

Posted August. 23, 2004 21:51,   


A series of cases have been witnessed in which many Korean companies invested in China, believing it as a “land of opportunity,” but couldn’t even collect the amount they had invested, and left the country.

Usually, it is because they were excited about the low labor costs and the huge domestic market of China, but failed to see the lack of infrastructure and the legal system in the country.

In the meantime, the gap between the level of Korean and Chinese technology is narrowing, and the anti-dumping actions of China are becoming aggressive, resulting in the speculation that Korea’s trade surplus to China will be reduced.

According to the Export-Import Bank of Korea, 19 Korean companies invested and entered the market in China, but eventually folded in the first half of this year from January to June.

These companies had poured in $39.9 million, but only salvaged $21 million, 52.6 percent of their initial investment.

Anti-Dumping Actions by the Chinese Government Are Also Becoming Harsh—

According to KOTRA (Korea Trade-Investment Promotion Agency), 19 anti-dumping actions were taken by the Chinese government against Korean products as of the end of July.

The Chinese government has opened two additional cases of dumping investigations again Korean products this year as well.

On top of this, the Chinese government is reported to be utilizing Korea’s trade surplus to China, which reached $13.2 billion in last year and comprised 88 percent of the total Korean trade surplus, as a main negotiation tool in the [Korea-China] rice negotiation and has alerted Korean negotiators.

Chinese rice will comprise about 65 percent of Korean imports in the next 10 years, and is becoming a stronger impact in the Korean rice market than the American rice.

Korean negotiators are reported to be having a difficult time with the Chinese government, who would like to package other issues with rice, during the third Korea-Chinese rice negotiation, which started on August 20.

Some analyzed that the fact that so many countries are rushing into China to invest might have changed the country’s attitude. In fact, China attracted the most Foreign Direct Investment (FDI) in the world last year, pushing the U.S. to second place.

In that light, many people warn that the other side of China is a “land of threats and challenges” to Korean companies.

Kim Sang-woo, a manager of the Department of International Cooperation in the Small Business Corporation (SBC), emphasized, “The Chinese government is usually very aggressive when attracting foreign investors, but it doesn’t provide much supervision afterwards. That’s why many Korean companies are having a difficult time there.” He advised, “[Before you invest], you have to analyze all the possible dangers of investment in China.”