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| Hyundai Motor seeks to sell its first plant in Beijing, after suspending the operation since 2019 over China's curb on Korean businesses in retaliation of the deployment of the U.S. THAAD missile shield in Korea. Korea Times file |
By Yi Whan-woo
Korean companies appear to be reluctant to expand their investments in China, although the latter's economy reported a record 18.3 percent surge in the first quarter year-on-year and is beckoning them to join in infrastructure development.
Experts said Tuesday the firms are concerned about the U.S.-China row ― notably the Washington-led move to untangle Beijing from global supply chains ― that may hurt their businesses if they invest in China.
They note that many companies are wary of China's economic retaliation ― which they see as "ongoing" ― referring to the actions taken in response to the deployment of a U.S. THAAD missile defense system here in 2017.
Meanwhile, the governments of Korea and China have declared the THAAD dispute has been settled.
"The U.S.-China tensions in politics and economics are expected to carry on for the long term and it is logical to say these make firms have second thoughts about investing in China," said Jun Bo-hee, a senior researcher at the Korea International Trade Association (KITA) Emerging Markets Research Department.
Regarding China's record year-on-year economic growth in the first quarter, Jun said this was "overstated" considering its economy shrank 6.8 percent during the January-March period last year when the COVID-19 virus first emerged in its central region of Wuhan and then spread all over the world.
Speaking on condition of anonymity, a researcher from a government-affiliated think tank said, "The lesson from THAAD is intimidating Korean firms from actively running businesses in China like they used to do."
The damage inflicted on Korean firms is still witnessed, as seen from Hyundai Motor's planned sell-off of its first Chinese plant built in Beijing. The firm has suspended operations there since 2019.
Retail giant Lotte is regarded as the biggest victim, suffering billions of won in losses and shutting down all units of its retail chain store Lotte Mart in China, following the deployment of the THAAD battery on a golf course previously owned by the conglomerate.
Yeon Won-ho, an associate research fellow at the Korea Institute for International Economic Policy (KIEP) Department of Chinese Economy, viewed the individual countries' move toward self-sufficiency in supply chains is another reason for Korean firms shunning investment in China.
He noted that many manufacturing firms, under the division of labor, got their supplies from China but struggled with strained supplies when the COVID-19 pandemic broke out last year.
"The companies must have realized the importance of diversified investments, such as expanding businesses in Southeast Asia instead of China, or even bringing operations back home," Yeon said.
A U.S.-led global supply chain may also complicate the origin of goods issue with respect to items produced in China by Korean companies.
"A main point of the U.S.-led global supply chain is to induce firms to produce goods in the U.S. Accordingly, Korean goods manufactured in China can become a matter of dispute," he added.
