Synergy through partnership“Province” is too modest an administrative category for oversized Guangdong on the southern coast of China. Its population of 106 million is more than double South Korea’s in an area nearly as big as the entire Korean Peninsula. Guangdong’s output reached $900.4 billion in 2012 and likely will soon top South Korea’s gross domestic product of $1.2 trillion.
Its economic hub, Shenzhen, is adjacent to Hong Kong and has direct access to foreign institutions. Guangdong-born Chinese dominate economic activities in major Southeast Asian countries. I remember being awed by my visit to a technology complex in Shenzhen. The techno-valley in Pangyo on the outskirts of Seoul is a miniature version of Shenzhen’s glitzy industrial parks. A multitude of high-technology parks are in pipelines all across China. Shanghai, at the northern tip of Guangdong, has a long-established reputation as a financial hub. It brings chagrin to our slogan of 10 years ago, pledging to turn ourselves into the financial hub of Northeast Asia.
A private British research institute forecast China will outrank the United States in real GDP within 10 years. The country already has elbowed past the United States to become the world’s largest trader, with a volume of $4 trillion last year. Imports surge 20 percent annually, making the country the world’s largest consumer market in addition to the top industrial powerhouse. Luxury consumer sales have ballooned. Despite various problems of having too many state enterprises and banks and an elusive shadow financial industry, China has evolved into an unmatched economic power. China’s e-commerce company Alibaba stunned the world by setting a global record with its initial public offering in New York last week.
German-American historian Andre Gunder Frank, in his book “ReOrient,” challenged popular Western perception to argue that China-led Asia grew faster and more than Europe and maintained its economic lead over Europe until the mid-19th century. After 150 years of stagnancy, China has rapidly risen to recover its past glory. In the 21st century, China added techno-nationalism to traditional sino-centralism. China has poured in its newfound riches and existing human and natural resources to advance the scientific and technology sector. Students studying science, engineering, and medicine in the United States totaled 95,400 in 2013, compared with 19,600 South Koreans. Chinese scientists have already built a space station and plan to land a manned spacecraft on the moon by 2020.
We were one of the biggest beneficiaries of the Chinese boon over the past 10 years.
China represents 26 percent of Korea’s total exports, compared to the 11 percent share of the United States. Over the past three years, Korea accumulated a $164 billion trade surplus with China. The Korean economy fared relatively well during the financial crisis because of lucrative business in China. But business cannot go on this strong forever. Exports to China have slipped some over the past few months. Cheaper local products have nudged Korean brands in the smartphone market and made inroads into the Korean market. A Chinese company released curved large TV sets ahead of Korean counterparts in the global market. China is quickly catching up to South Korean enterprises in IT, petrochemical, shipping and steel. Chinese manufacturers no longer need Korean parts and intermediary supplies. In the luxury consumer market, Chinese companies have joined up with Western household names and leave little room for Korean companies. Korea Inc. must revise its foray strategy, shifting from an intermediary focus to directly target in the consumer market.
We must not regard the Chinese rise with fear, but as an opportunity. A company alone has no chance in China. Korean companies should collaborate in consortiums of both large and small scales in different industrial sectors to compete against Chinese technological might. Large and small business networks must seek synergy through partnerships. For example, a large company could use a network of home shopping and planning channels to target the high-end eco-friendly agriculture market in China, together with small and midsize companies using Korean produces.
Small and midsize companies must look outward and endeavor to gain global competitiveness to prepare for liberalization after a free trade agreement with China. Companies, research institutes, the legislature and government all must join to realign Korean industrial and technology power. China is a vast market close to our country. But we must remember that without uniting resources and corporate power, we could end up as a peripheral dependent of the Chinese economy.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, Sept. 26, Page 35
*The author is the chairman of the National Commission for Corporate Partnership.
By Ahn Choong-yong