South Koreans' love affair with China losing luster
Source: Xinhua |
August 24, 2012, Friday
|
Print Edition
Print Edition
WHEN Lim Young-chul first came to China from South Korea in 1989, he knew little about his destination. "It was a big country with a large population, and it looked close to South Korea on the map. That was all," Lim recalls.
The then 26-year-old Seoul native made a bold decision, in many of his countrymen's eyes, to set up a factory making speakers in China, even before the two countries had established diplomatic ties.
With this week marking the 20th anniversary of diplomatic ties, Lim's Toptone Electronics Co is the oldest Korean enterprise in China. Still nestled in a small complex of three-story buildings near Qingdao, a coastal city in east China's Shandong Province facing South Korea across the sea, the company has grown bigger, though less profitable after being hurt by two financial crises and rising costs.
Spending more than two thirds of his time in China over the past two decades, Lim has seen firsthand how things have changed since the two countries forged diplomatic relations in 1992.
China's economy has grown very fast. Trade has flourished, with China becoming the biggest trading partner of many countries, including South Korea.
On the other hand, more Koreans have come to capitalize on China's boom. South Korea has been one of the top investors in China despite declining market conditions from the 2006 peak.
Fled back home
In China, Lim and other Korean businesspeople have experienced a string of ups and downs. Two decades on, some of them survive and thrive, some have gone under, some have relocated, some fled back home in ignominy, and some are looking to the future.
For the first batch of Korean entrepreneurs, China's cheap labor was the lure. But those days are gone and are unlikely to come back.
In Qingdao and Weihai, another Shandong coastal city that is home to clusters of Korean factories, business owners grumble that surging costs have bitten into their profits.
China is no longer cheap like it used to be, says Kang Young-yil, chairman of Weihai Dahua Wood Industry Co, an 18-year-old firm that makes shrines for export to Japan.
Land prices have been rising. Environmental fees, safety regulations and taxes have also increased since the government ended favorable treatment for foreign companies a couple of years ago. However, the biggest problem, Kang says, is labor.
Wages have surged by 20 percent a year for the past three years, far out-pacing the business growth rate. "Most small businesses like us can hardly afford that," notes Kang.
"In 1989, the average salary of my workers was 90 yuan (about US$23.9 at the time) per month, and people were dying for a post in my factory," Lim remembers. "Nowadays, I have to pay 2,500 yuan (US$392.9). Yet it's very hard to get staff."
Lim's remarks highlight another predicament along with soaring costs - labor shortage. Workers have become more mobile than ever. China's coastal regions, though, seem to be losing their allure for them.
New Year break
Choi Hyun-jeong, executive director of bag manufacturer Youjin First Co in Qingdao, says 15 percent of staff leave the job within a year. Weihai Sungho Electronics Co, a firm making power supply units for Samsung and LG, lost the same proportion of workers during the Chinese New Year break, according to Senior Managing Director Kim Young-woo.
Meanwhile, the sluggish global economy and the weak won have also added to the pressure on these Korean companies, leading many of them into operating difficulties.
A bunch of labor-intensive Korean enterprises are now losing money or at best breaking even. Kang's Dahua has suffered a net loss since 2010. Lim's Toptone made no profit last year.
Some Korean entrepreneurs are biting the bullet and cutting costs. Lim replaced some laborers with machines, slashing the number of employees by two thirds from its peak to the current 600.
Others have moved their operations to Vietnam, Indonesia and other countries in Southeast Asia where labor is cheaper. However, a few just ran away, leaving unpaid workers and piles of debt behind.
Many manufacturers in South Korea do not regard China as the best place to invest now, Sungho's Kim explains. Statistics also indicate that Koreans seem to be winding up their investment spree in China.
The then 26-year-old Seoul native made a bold decision, in many of his countrymen's eyes, to set up a factory making speakers in China, even before the two countries had established diplomatic ties.
With this week marking the 20th anniversary of diplomatic ties, Lim's Toptone Electronics Co is the oldest Korean enterprise in China. Still nestled in a small complex of three-story buildings near Qingdao, a coastal city in east China's Shandong Province facing South Korea across the sea, the company has grown bigger, though less profitable after being hurt by two financial crises and rising costs.
Spending more than two thirds of his time in China over the past two decades, Lim has seen firsthand how things have changed since the two countries forged diplomatic relations in 1992.
China's economy has grown very fast. Trade has flourished, with China becoming the biggest trading partner of many countries, including South Korea.
On the other hand, more Koreans have come to capitalize on China's boom. South Korea has been one of the top investors in China despite declining market conditions from the 2006 peak.
Fled back home
In China, Lim and other Korean businesspeople have experienced a string of ups and downs. Two decades on, some of them survive and thrive, some have gone under, some have relocated, some fled back home in ignominy, and some are looking to the future.
For the first batch of Korean entrepreneurs, China's cheap labor was the lure. But those days are gone and are unlikely to come back.
In Qingdao and Weihai, another Shandong coastal city that is home to clusters of Korean factories, business owners grumble that surging costs have bitten into their profits.
China is no longer cheap like it used to be, says Kang Young-yil, chairman of Weihai Dahua Wood Industry Co, an 18-year-old firm that makes shrines for export to Japan.
Land prices have been rising. Environmental fees, safety regulations and taxes have also increased since the government ended favorable treatment for foreign companies a couple of years ago. However, the biggest problem, Kang says, is labor.
Wages have surged by 20 percent a year for the past three years, far out-pacing the business growth rate. "Most small businesses like us can hardly afford that," notes Kang.
"In 1989, the average salary of my workers was 90 yuan (about US$23.9 at the time) per month, and people were dying for a post in my factory," Lim remembers. "Nowadays, I have to pay 2,500 yuan (US$392.9). Yet it's very hard to get staff."
Lim's remarks highlight another predicament along with soaring costs - labor shortage. Workers have become more mobile than ever. China's coastal regions, though, seem to be losing their allure for them.
New Year break
Choi Hyun-jeong, executive director of bag manufacturer Youjin First Co in Qingdao, says 15 percent of staff leave the job within a year. Weihai Sungho Electronics Co, a firm making power supply units for Samsung and LG, lost the same proportion of workers during the Chinese New Year break, according to Senior Managing Director Kim Young-woo.
Meanwhile, the sluggish global economy and the weak won have also added to the pressure on these Korean companies, leading many of them into operating difficulties.
A bunch of labor-intensive Korean enterprises are now losing money or at best breaking even. Kang's Dahua has suffered a net loss since 2010. Lim's Toptone made no profit last year.
Some Korean entrepreneurs are biting the bullet and cutting costs. Lim replaced some laborers with machines, slashing the number of employees by two thirds from its peak to the current 600.
Others have moved their operations to Vietnam, Indonesia and other countries in Southeast Asia where labor is cheaper. However, a few just ran away, leaving unpaid workers and piles of debt behind.
Many manufacturers in South Korea do not regard China as the best place to invest now, Sungho's Kim explains. Statistics also indicate that Koreans seem to be winding up their investment spree in China.
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