4th March 2005 – Last year saw South Korea replacing Japan to become China’s third largest investor, and in turn there was a sudden increase in the amount of bilateral trade and investment between South Korea and China.
China’s Ministry of Commerce (MOFCOM) released statistics which detailed that the amount of realized foreign direct investment (FDI) to China from South Korea equaled $6.25 billion US during last year, which represents a 40% annual increase.
South Korean statistics released recently, suggested that their FDI to China represented 45% of their total overseas investment during 2004.
The South Korean Embassy in China said that the figures released by South Korea did not calculate the amount of reinvestment by South Korean companies that were based in China and that this was why their figures amounted to less than the on produced by MOFCOM.
According to a MOFCOM official, China has been the main investment magnet for South Korea for a couple of years.
South Korea’s commercial chancellor, Kim Dong-sun said that most of the investment from South Korea was injected into northern coastal towns in China, which lie geographically close to South Korea.
In order to benefit financially from the transport advantages and the low cost of labor that is offered in such provinces, companies based in South Korea have moved some of their industries that are very labor-intensive like the manufacturing of textile, garments and shoes to China.
Kim said “Around 50 per cent of South Korean manufacturing companies are considering investing in China,”
There is a variety of big companies from South Korea like LG, Hyundai and Samsung that consider China to be a key part to their expansion.
LG Electronics’ CEO, Kim Ssang-su, said that the company would stick to a principle they believed in, of trying to become a successful Chinese company rather than being labeled as a South Korean company that had become successful in China.
Although large, multinational South Korean companies are consistently increasing their input into the Chinese market, there is increasingly smaller companies that are placing a lot of importance on gaining a presence within China.
The owner of a Korean restaurant based in Shanghai, Koo Dong-gun said his business had developed further and further in conjunction with the increase in the amount of South Koreans that had moved to the city.
“I invested about US$54,000 to open this restaurant two years ago,” he said. “I plan to open another restaurant in the city in the second half this year.”
China has also increased the amount of investment it has made in South Korea as part of its “go-out” policy.
By November last year, there had been 90 direct investment projects to South Korea approved by China’s Government which resulted in enterprises in China making investments in excess of $890 million U.S.