Korean businesses look self-conscious in front of Washington

South Korean businesses, despite the challenging geopolitical landscape, are demonstrating remarkable resilience and adaptability.

South Korean and Chinese business leaders held a meeting at Walkerhill Hotel in Seoul last December for the first time in four years. Across the table were SK Group Chairman Chey Tae-won, who leads the Korea Chamber of Commerce and Industry (KCCI), Hyundai Motor Group Chair Chung Eui-sun, and Samsung Electronics President Park Seung-hee, who were accompanied by Chinese business moguls in energy, petrochemistry, and bio industries. All the business leaders engaged in discussion in a lighthearted mood as they were joined by former South Korean government officials such as former deputy prime minister and minister of finance Yoo Il-ho; former minister of health and welfare Rim Chae-min; and former chief FTA negotiator Choi Seok-young. Indeed, this provided a buffer zone during the talks between C-level corporate representatives from South Korea and China; and former high-ranking government leaders.

It was part of normal business practice for South Korean companies, which have both production hubs and consumers in China, to occasionally meet up to promote cooperation up until tensions started growing between China and the United States. Given how China works, they invested a great deal of time in building social networks not only with their business partners but also with China’s central and local government authorities. However, after a set of new U.S. sanctions on China turned things around back in 2018, South Korean companies found it harder to visit China when they encountered some issues with business deals and production lines they should get right. They were only limited to low-profile, small-sized trips.

It was reported that South Korean and Chinese business leaders enjoyed a productive and fruitful time at a late-night drinking party as part of the gathering for the first time in four years. They all had a heart-to-heart chat over drinks for the first time in a long time, sharing their viewpoints on business issues and investment plans.

With Washington and China at odds with each other for quite a long time, South Korean companies are seeing the consequences of their sour relations. As U.S. Secretary of Commerce Gina Raimondo has continuously argued for export controls of chip equipment to China, it is not U.S. equipment firms but South Korean makers that lost a considerable portion of the Chinese market. To be specific, the amount of import costs China spent on South Korean chip equipment dropped by 20.3 percent as of last year compared to the year earlier; the corresponding figure for U.S. chip equipment only decreased by 3.1 percent during the same period. By contrast, China recorded an increase in imports from the Netherlands and Japan by 150.6 percent and 4.7 percent, respectively.

With the damage done unknowingly to South Korean businesses, the Semiconductor Industry Association, a group of U.S. chip companies, jointly opposed the U.S. government’s sanctions on China last July, arguing that the semiconductor sector needs to maintain its access to Chinese clients. In March, Apple CEO Tim Cook, concerned about the marked drop in sales in the Chinese market, flew to China to talk to Chinese President Xi Jinping. Additionally, he opened the door at Apple's newest store in Shanghai on its opening day.

Compared to their U.S. competitors, South Korean businesses seem to have less room for maneuvering, sandwiched between Washington and Beijing, even while the market they have painstakingly built around is closing its door with their hands tied. They desperately wait for Seoul to facilitate diplomatic communication channels. This all explains the high expectations for the upcoming summit talk among South Korea, China, and Japan, which will likely occur by the end of this month. Given that the three governments will also have a ministerial meeting regarding economic affairs and commerce for the first time in four years since December 2019, Seoul is highly expected to take a “frenemy” approach over the talks. Just as Washington takes an offensive posture at the forefront but gives a leg up to businesses behind the scenes, Seoul needs to ensure that South Korean companies get a chance at least to take a relieving breath in the upcoming talks.