Bracing for Xi Jinping era

Korean firms advised to rechart China strategies

A mall screen shows Chinese Communist Party new General Secretary Xi Jinping speak at a press conference in Beijing, Thursday. Xi became leader of China on Thursday, securing the Communist Party’s top spot. / AP-Yonhap

Korea Inc is widely expected to face fiercer challenges from Chinese rivals during the era of Xi Jinping who has just been elected by the ruling communist party there to lead the world’s second largest economy for the next 10 years.

With the new Chinese president vowing to transform his country into a more capital and technology-oriented economy, Korean firms across the board will likely see their technological edge over Chinese competitors evaporate quickly.

Analysts here say domestic electronics producers, steelmakers and other businesses should make more effort to develop next-generation technologies and produce state-of-the-art products to keep Chinese rivals at bay.

They suggested that domestic companies need to boost cooperation with Chinese partners, and make inroads into China’s inland areas for new markets, saying Korea should increase the shipments of telecommunication devices, pharmaceuticals, cosmetics and cultural content to the world’s fastest growing economy.

Kwon Kyuk-jae, a researcher at Samsung Economic Research Institute, stressed that local firms should revise their strategies for China.

“China has largely been a production base for Korean businesses. But due to soaring labor and other costs, the country has lost appeal. Now, local firms should go to China not to produce but to sell finished products to increasingly wealthy Chinese consumers,’’ Kwon said.

The researcher also said that China’s inland areas are promising for local firms, urging them to develop and sell goods tailored to consumers in each region.

“I do not expect that the Chinese government will radically change the course of its economic policies because Xi was deeply involved in the policymaking of the previous government. He will try to turn his country into a more domestic market-oriented economy and encourage companies to invest more in high-tech, energy-efficient, environment-friendly industries,’’ Kwon said.

The Korea Chamber of Commerce and Industry (KCCI) said Thursday that Chinese manufacturers, which used to dominate the global consumer market on the back of their unrivaled price-competitiveness, have significantly narrowed the technological gap with Korean firms.

It said the trend will likely accelerate as Xi Jinping, who has pledged to advance China’s economic structure, takes the helm of the world’s most populous country, expressing concerns that China may surpass Korea in key industrial sectors.

Citing a study by the Korea Institute for Industrial Economics & Trade, KCCI said when the competitiveness of Korea’s textile industry is set at 100, that of China is estimated at 99.1. The relative strength of the Chinese cellular phone, steel, and petrochemical sectors were rated at 93.3, 92.7 and 91.6, respectively.

In contrast, Korea is found to be far ahead of China in the shipbuilding, automobile, display and semiconductor sectors.

“We expect the new Chinese government to put greater priority on stimulating domestic consumption and developing cutting-edge information technology, renewable energy and other high-tech industries,’’ a KCCI official said. “In such areas, Korea and China will engage in a much fiercer war. But at the same time, local firms need to strengthen partnerships with Chinese rivals in research and production.’’

The official said local businesses should make a foray into the mainland’s central and western parts in a bid to secure an upper hand in the rapidly growing consumer market there ahead of Japanese and other foreign rivals.

“With President Xi and other senior policymakers expected to introduce a slew of policies to enlarge the domestic consumption market, retailers and manufactures of pharmaceuticals, cosmetics and other high-end goods should penetrate deeper into the fast-growing consumer market,’’ he said. <The Korea Times/Lee Hyo-sik>