South Korea and China are going to have talks over a string of
illegal Korean investment withdrawals that took place just after
China tightened policies for overseas investors, the Republic of
Korea (ROK) government revealed on February 14.
Tae Yeol Cho, an official from the ROK Ministry of Foreign
Affairs and Trade, was quoted by Yonhap News Agency saying that the
two countries were currently discussing the issue using all
possible channels to simplify procedures for Korean investors who
urgently need to pull out their money located in China.
According to Cho, a subsidy package totaling US$70,000 has been
distributed to South-Korean-enterprises intensive zones to aid
investors tackling legal issues in China before leaving. The Korean
government is also considering expanding legal aid via more
discussions if necessary.
A number of Korean investors left China without legal permits
after the country tightened its controls over land and labor force
management, according to Chinanews.com. The news website cited a
report from the official Ministry of Commerce website.
By the end of January, investors from 103 Korean enterprises in
Jiaozhou, Shandong Province, had moved out of China, abandoning
their manufacturing facilities, the International Herald
Leader reported on January 28. Labor costs for South Korea's
small and medium-sized enterprises in China may increase by 50
percent since the country enacted the Labor Contract Law on January
1 and also adopted a series of policies to curtail pollution, the
newspaper cited from South Korean media sources. Fearing
complicated clearing procedures and various requirements regarding
tax repayments, some top Korean executives left China abruptly
without any explanations, the Korean media reported.
According to the South Korea based Joongang Daily,
about 20 percent of the 20,000 Korean enterprises in China have
experienced continuous losses in recent years. The newspaper
foresaw that roughly 4,000 companies would cease investments in
China.
Yet Chinese experts disagreed on calling the exodus what the
South Korean media termed as a "massive withdrawal". "The overseas
reports are somewhat exaggerating the issue. In fact, only a few
Korean enterprises, relying on cheap labor and old preferential
policies, have retreated from the China market," said Zhang
Yansheng, Director of the Institute of Foreign Economies affiliated
to the National Development and Reform Commission. "The Korean
investors are probably touting for benefits through the local media
in order to affect the policy-making departments in China," said
Zhang.
Still, experts believe China should take strategic measures
during its economic transition to avoid hasty retreats like these
Korean enterprises. "Measures compatible with gradual adjustments
in the country's economy should be adopted for overseas enterprises
in order to lessen their reactions," said Zhang.
Meanwhile, Song Hong, head of the international trade research
office in the Institute of World Economics and Politics of Chinese
Academy of Social Sciences, said that the withdrawal of Korean
enterprises is just one symptom of a gradually changed market
caused by China's altered policies towards overseas investments
since 2005. "Overseas enterprises are now starting to evaluate
business risks when targeting the Chinese market as they see
opportunities shrinking," Song said.
(China.org.cn by Wu Jin, February 18, 2008)
