China–Korea Economic Cooperation in Business

Over 63% of Korea’s exports to China are concentrated in the top 10 product categories.
- The reliance on the top 10 export items rose slightly from 62.5% to 63.3%, and the share of intermediate goods increased from 79.8% to 80.4%, showing continued dependence on specific items.
- Semiconductors: Demand continues to grow due to China’s push for digital transformation and the development of seven key advanced technologies.
- Computers: Export growth driven by corporate digital transformation and increased demand for servers and SSDs.
- Wireless communication devices: Infrastructure expansion and steady demand for 5G and premium mobile phones support export growth.
- Flat-panel displays (DSP): Growing demand for OLED in phones, laptops, and TVs, and rapid expansion of automotive displays.
- Cosmetics: K-beauty popularity and recovery of everyday life led to a rebound in export performance.
Imports from China continue to rise sharply, partly due to the base effect of the pandemic.

Success Case

Company W, a venture firm specializing in beauty and medical laser equipment, identified growing demand for skin treatment devices in China due to rising income and purchasing power.
Participated in trade shows and academic conferences to assess market potential and developed a strategy for entry.
Products were promoted through KOTRA, necessary certifications obtained, and the company secured a $10 million export contract with major hospitals and dermatology clinics.

Key Takeaway: Advance understanding of export procedures and obtaining CFDA certification in advance contributed to success.

Failure Case

Company S, a cosmetics manufacturer, focused solely on selling through major department stores and ignored online channels.
High rent and labor costs, plus intense competition, led to unsustainable margins. The company eventually withdrew from the market.

Key Takeaway: Over-reliance on offline channels, inability to compete on price, and lack of product differentiation led to failure.

In 2020, 88.7% of Korea’s investment in China was in the manufacturing sector.
Total Korean FDI in China reached $4.5 billion in 2020 and $2.45 billion in H1 2021, ranking China as Korea’s second-largest investment destination, though interest is shifting to Southeast Asia.
Example: SK Hynix signed a RMB 2 billion investment agreement with Jiangsu Province to establish a semiconductor cluster in Wuxi.

Regional Distribution (2020):

By number of new corporations: Shanghai (63), Shandong (51), Jiangsu (42)
By investment amount: Jiangsu ($2.65B), Shandong ($570M) — combined 71.4% of total

Industry Focus:

Manufacturing accounted for 88.7% of total investment; retail and services comprised the rest.

Success Case

Restaurant company A entered the Chinese market after thorough research into local tastes, pricing, and regulations.
Used popular food delivery apps to promote its brand and achieved success through effective localization.

Key Takeaway: Customizing offerings based on real consumer demand and local trends led to a strong market fit.

Failure Case

Dessert café S attempted to capitalize on K-drama popularity, opening a flagship store in Shanghai and planning rapid expansion to 100 locations.
Lacked trademark registration; disputes with a local franchisee led to lawsuits. Another brand with a similar concept opened in the same building.

Key Takeaway: Entering the market without securing IP rights or reliable partners led to brand and legal issues.

■ Deepening Bilateral Partnership on the 30th Anniversary of Diplomatic Relations

Since establishing diplomatic ties in 1992, Korea-China relations have evolved into a strategic partnership, especially in trade and investment.
Korea’s trade with China grew from $6.3B in 1992 to $245B in 2020 — a 39-fold increase.
- In 2020, China was Korea’s top trading partner (24.6% of total trade), top export destination (25.9%), and top import source (23.3%).
China’s investment in Korea grew from $20M in 1992 to $1.99B in 2020 — a 100-fold increase.

■ New Business Models and Cooperation Opportunities

Post-COVID, both governments and private sectors need to enhance quality cooperation and explore new models.
China’s “dual circulation” strategy can be leveraged to expand cooperation in both domestic and international markets.

■ Leveraging China’s Multilateral Diplomacy

In response to U.S.-China tensions, China is expanding its presence in international organizations and boosting financial contributions.
RCEP, China-Japan-Korea FTA, CPTPP offer pathways for Korean companies to enter new markets.
- RCEP, covering ~30% of global GDP and trade, includes broad provisions on goods, services, IP, and e-commerce.
- Upon RCEP’s implementation, streamlined rules of origin and customs procedures will boost intermediate goods trade between Korea and China.
- Korea, Japan, and China can jointly expand into third markets (e.g., ASEAN) by leveraging complementary strengths (e.g., Korea-Japan in finance and operations; China in construction).

■ Advancing Service & Investment Chapters of the Korea–China FTA

Since the goods-focused FTA took effect, service and investment negotiations have progressed to the 9th round (as of October 2020).
If concluded, the agreement could ease market access and foreign investment restrictions in high-demand sectors:
- Tourism, construction, finance, content, legal services, healthcare, and certification
- Target industries under China’s 14th Five-Year Plan: new materials, smart manufacturing, aircraft engines, medical devices, future mobility, space & deep-sea exploration
- Core technologies: AI, quantum info, ICs, neuroscience, biotech, clinical healthcare

Pending Issues in Korea–China FTA Service & Investment Talks:

China’s mass entrepreneurship and innovation policies have fueled a nationwide startup boom.
Local and central governments promote tech-driven ventures, especially in Beijing and Shenzhen.
Co-growth models between large firms and startups are creating sustainable ecosystems.
As of 2020, China had 251 unicorns valued over $1 trillion. Top 12 firms accounted for 52.6% of total value.
- Unicorn criteria: registered in China, under 10 years old, unlisted, valued at over $1B.
- Top startups: ByteDance, Ant Group, Didi, Cainiao, Kuaishou, WeBank, JD Tech, Yuanfudao, Shein, JD Logistics