The Korea Herald

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[Editorial] Exports to China

Growing consumer market should be targeted

By Korea Herald

Published : Sept. 11, 2014 - 20:28

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Korea has seen its exports to China, its largest trading partner, falling this year, even as its overall shipments abroad continue to grow. This trend is worrisome for Korea, which relies on the world’s most populous nation for nearly 30 percent of its exports.

In the first eight months of 2014, the country’s shipments to China dropped by 1.5 percent from a year earlier, in contrast to a 2.5 percent rise in its overall exports, according to figures from the Ministry of Trade, Industry and Energy. The decrease in exports to China results mainly from Korean businesses’ failure to adapt to changes in China’s economic conditions and policies.

Above all, Korean companies should turn their eyes to the rapidly growing consumer market in the world’s second-largest economy. Over the past five years, domestic spending in China increased by an annual average of 13.7 percent. Chinese customers now buy nearly a third of luxury goods sold across the globe. China’s consumer market is forecast to more than double from $4.7 trillion in 2013 to $9.9 trillion in 2020, according to a report by a local economic research institute.

Beijing policymakers have emphasized the importance of fostering consumer demand to put the economy on a more sustainable track after decades of export-driven dazzling expansion, which has deepened internal imbalances.

In these circumstances, consumer goods account for a meager 3.2 percent of Korea’s exports to China. Korean companies need to adjust their business strategy from focusing on selling intermediary products to shipping more consumer goods.

The government took necessary steps last week to expand support for Korean businesses seeking to make inroads into China’s consumer market. Korean consumer goods, especially those made by small and medium-sized enterprises, will get wider access to Chinese customers through online shopping malls and exclusive shops at China’s major retail chains. Funds will be raised to help export films and other cultural products to China. The government also plans to build a joint industrial complex here to manufacture goods targeting Chinese consumers.

Choi Kyung-hwan, the deputy prime minister for economic affairs, pledged to do whatever works to help local businesses enter and widen their presence in China’s growing domestic market.

These measures, however, are not enough to ensure Korean companies will sell more consumer goods in China in the face of mounting competition from their foreign rivals. They need to strengthen efforts to release new products that can be differentiated from others in design, quality and usefulness. In the long run, they should lead Chinese consumers to have firm trust in their brands.

Korean enterprises may also find more business opportunities by aligning themselves with China’s policies to develop its backward inland regions and open its service sector. They are also well positioned to contribute to Beijing’s drive to settle deteriorating environmental problems.