By Kate Yuan

About 10% of South Korean companies in China are considering leaving, while some say their sales and profits are increasing thanks to the country's accelerated localization, the Korea Institute for Industrial Economics and Trade (KIIET) said on January 4 after surveying 406 South Korean companies in China.

The proportion considering to leave rose from 2.7% to 9.6% in the last two years due to slowed down local economy, rising labor costs and intensifying competition, these companies said.

Specifically, more than 45% of them said sales in 2021 declined, and more than 58% said their sales are likely to have decreased in 2022. Only 27.3% and 14.5% said sales increased in 2021 and 2022. In addition, 62.1% claimed a decline in profit in 2022, while only 11.5% mentioned an increase in 2022.

Meanwhile, two-thirds said their business in China would not improve in the next two to three years, and 21.4% said business would shrink during this period.

However, some also said that their sales and profits in China are growing and they would expand their presence there. According to KIIET, these companies have successfully localized themselves and are benefiting from increasing local demand caused by the US-China rivalry.

Although doing business in China is not as attractive as before, South Korean companies’ localization in China is accelerating. The survey showed the proportion of raw and auxiliary materials purchased locally increased from 65.8% to 71.3% within two years, and the ratio of those sold to Chinese companies rose from 31.5% to 38.5%.