[INTERVIEW] Chinese businessperson demands fundamental change in mindset of S. Korean businessmen

Lim Chang-won Reporter Posted : 2018-11-28 15:08 Updated : 2018-11-28 15:08
글씨작게 글씨크게

[Photo by Yi Kyoung-tae]

(This interview was arranged and conducted by Yi Kyoung-tae, an Aju Business Daily reporter.)

SEOUL -- South Korean companies saw a gradual recovery in Asia's biggest market this year after a prolonged business setback caused by a diplomatic row over a U.S. missile shield that prompted China's informal trade and economic retaliation. However, a cross-border trader warned that it's not easy to win over Chinese consumers.

Since US troops were allowed to bring in a Terminal High Altitude Area Defense (THAAD) system in 2016, Chinese consumers have shunned South Korean products, dealing a blow, especially to South Korea's small and medium-sized enterprises.

The deficit in South Korea's tourism industry soared 112 percent on-year to a record high of $13.75 billion last year. About 4.16 million Chinese visitors arrived in South Korea in 2017, down 48.3 percent from the previous year. In October last year, the two countries agreed to normalize relations, but progress has been slow.

"Everyone knows that Korean products have been hit hard in China in the second half of 2016 and last year due to a THAAD row. It will take a long time to get it back once distribution comes to a halt," said Yu Wei, a Chinese businesswoman who runs 21C Baby World, the producer and distributor of baby products in South Korea. She is
also a key investor in Worldcross Trading Co., which has a distribution network across China.

"It will be difficult to reverse the situation," Yu said in an interview with Aju Business Daily, adding that Chinese consumers who have favored South Korean products turned their eyes to alternatives from other countries. "My acquaintance who works at an import customs clearance company in Shanghai says that there are very few Korean products imported into China, and a lot of products come from geographically close areas like Thailand and Vietnam."

"Korean products need special momentum to gain strength again in China, although it's not easy to find," she said, urging South Korea to enhance competitiveness with high quality, unrivaled technology and reasonable prices. "We must think carefully about why Chinese consumers are importing and consuming (Korean products)."

"First, Korean products must maintain excellent quality. For a good quality global brand, the price does not matter," Yu said, suggesting Chinese products cannot keep up with the design and quality of some South Korean products.

"As a THAAD row between South Korea and China gets prolonged, Japan has come in with price competitiveness," Yu said. "If you find a turning point in these three aspects, you can fill the gap that you have lost."

To draw Chinese visitors back into South Korea, Yu called for the introduction of a Japanese model to activate many tax refund shops in local cities. "Small Japanese stores offer tax exemptions if you show passports. It is different in South Korea which has not many such shops."

[Photo by Yi Kyoung-tae]

The National Tax Service's 2017 data showed that 11,793 ordinary stores offer tax refund services nationwide, with 67.4 percent of them concentrated in the metropolitan area. Since the THAAD dispute erupted, Chinese group tours have been banned, but private visitors have changed the style of traveling in South Korea, favoring local cities instead of blind shopping in big cities.

"As free travel has become more active, more Chinese tourists visit local cities," Yu said. The deficit in South Korea's tourism industry soared 112 percent on-year to a record high of $13.75 billion last year. About 4.16 million Chinese visitors arrived in South Korea in 2017, down 48.3 percent from the previous year.

About China's online market, which has seen stellar growth, Yu warned that South Korean enterprises should be cautious, citing fake goods. China is the biggest producer of counterfeit and pirated goods, with the intellectual property rights of foreign companies being frequently infringed. 

"At present, there are many difficulties in selling products through China's online market. Many bring products to China and place them online, but it is not easy to distinguish genuine products," Yu said.

At an initial stage, foreign products can improve brand reputation through China's online market, but copycats would replace them quickly, she said. "It is better to raise your brand position by putting products first through South Korea's famous online mall because Chinese consumers know well through their internet search."

She called for attention to Chinese consumers who buy goods directly from South Korean online malls and "Daigou", a proxy-purchasing group of middlemen in China's e-commerce, who buy luxury goods and expensive cosmetics at duty-free shops and boutiques abroad.

"It would be good to meet the demand for direct buying by Chinese consumers," Yu said. "Daigou mainly imports cosmetics into the Chinese market, and shipments through them are significant. If you are thinking about new items to sell, it is good to find what they take."

Trust is a virtue South Korean businessmen should promote in dealing with Chinese partners, Yu said, referring to growing complains among Chinese buyers that South Korean businessmen are not credible. "Chinese buyers want exclusive sales, but if products have a high preference, competitors get them."

"If it sells well, Korean suppliers continue to raise its price," she said, adding that distrust has weakened the competitiveness of South Korean products in China.