May 02, 2024

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[THE INVESTOR] South Korean businesses operating in China suffered falls in sales for the first three months of the year due to the soured ties between the two countries, a report showed on April 18.

According to a survey by the Korea Institute of Industrial Economics and Trade, an index for companies’ sales performance logged 78 for March, down from 102 in the previous quarter.

An index reading below 100 suggests there are a larger number of companies with negative views or outlook about their performance, while a figure higher than that means vice versa.

The institute surveyed a total of 218 companies running businesses in Beijing across seven industries from March 2 to 31.

Automakers’ views on their sales plummeted to 36 during the first quarter of this year from 138 in the fourth quarter of 2016, showing toughened conditions for foreign carmakers in the country.

Korea’s Hyundai Motor and Kia Motors saw a combined 52 percent slide in their March sales in China.

“We’ve seen a drop in recent sales in China as consumer sentiment towards Korean products is low while local competitors initiated strong promotions,” said Hyundai in a statement.

Some say that backlash over the deployment of a US missile shield in Korea is denting the sales of the Korean carmakers amid heightened competition with Chinese automakers.

In the survey, the companies cited increasing competition with their Chinese counterparts as one of the difficulties. They also said they faced tighter regulations than the previous quarter, especially on environmental and safety conditions. 

Retailers said customs and tariff rules were stricter than before.

More than 80 percent of the retail businesses said they are feeling the impact of bilateral relations over the THAAD deployment.  

“There were increased regulations and crackdowns on Korean companies since the relations got worse,” said one of the respondents.

An overall outlook for business for the next three months stood at 89, a slight increase from 80 in the first quarter, the survey showed.

“Many companies have forecast that conditions wouldn’t improve much in the next quarter,” said a researcher at KIET.  

By Song Su-hyun/The Korea Herald (song@heraldcorp.com)