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Photo courtesy of Yonhap News |
[Alpha Biz= Kim Jisun] More than three out of ten South Korean companies operating in China are considering withdrawing, relocating, or scaling down their businesses within the next five years, as worsening business conditions raise concerns over their long-term strategies, a government-affiliated research institute said.
According to a survey released on Jan. 14 by the Beijing office of the Korea Institute for Industrial Economics & Trade (KIET), 9.7% of Korean companies in China expect to fully withdraw within five years, while 1.8% foresee relocating operations and 20.9% anticipate downsizing their businesses.
The combined figure of companies considering exit, relocation, or downsizing stood at 32.4%, down from 37% in the 2024 survey, which recorded withdrawal at 8.8%, relocation at 3.6%, and downsizing at 24.6%.
The proportion of companies expecting to maintain their current operations over the next five years remained largely unchanged at 48.6%, compared with 49.2% in 2024. However, optimism increased, with 19.1% projecting business expansion, up from 13.8% a year earlier.
Negative outlooks were most pronounced in the display sector, where 33.3% of firms expected to withdraw, 8.3% to relocate, and 16.7% to downsize. The mobile phone and home appliance sector also showed weak sentiment, with 27.3% anticipating downsizing, while wholesale and retail distribution firms reported high withdrawal (13.7%) and downsizing (27.5%) expectations.
In contrast, companies in the excavator and shipbuilding sectors showed relatively strong confidence, with 46.2% forecasting business expansion and 23.1% expecting to maintain current operations.
The survey found that intensifying local competition, rising production costs, and difficulties in business succession were the main drivers behind restructuring considerations. Southeast Asia emerged as the most preferred relocation destination at 59%, followed by South Korea at 17%.
Business performance expectations deteriorated notably in this year’s survey. Only 25.7% of companies expected revenue growth, down sharply from 35% in 2024, while 41.3% anticipated a decline in sales, up from 36% a year earlier.
Respondents cited intensifying competition in China, sluggish local demand, and supply chain uncertainties stemming from U.S.-China tensions as key factors weighing on revenues. On the positive side, improved product competitiveness, business diversification, and rising local demand were identified as drivers of potential revenue growth.
The survey was conducted between August and November last year, covering 455 South Korean companies operating in China.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
