Kotra’s China chiefs offer advice

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Kotra’s China chiefs offer advice

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Chinese buyers inspect products presented by a Korean manufacturer at the Korea-China Free Trade Agreement Business Plaza on Monday at Kintex in Ilsan, Gyeonggi. Representatives from about 360 Chinese companies attended the event hosted by the Korea Trade-Investment Promotion Agency. Provided by Kotra

With the Korea-China Free Trade Agreement set to go into effect soon, Korea Trade-Investment Promotion Agency (Kotra) China branch heads said Korean companies that want to do business in China should diversify from simply selling quality goods into service businesses and sales through e-commerce.

Five Kotra China branch heads gathered at the JoongAng Ilbo office in central Seoul on Sunday to discuss new strategies for export companies that want to build business relationships in China under the FTA.

“Economies evolve from industry-based to knowledge-based to network-based. Korea and China have entered the third stage,” said Park Han-jin, head of Kotra’s China business support division. “What’s significant is to understand the quickly changing domestic market of China. Customized marketing strategies for each target consumer group are significant.”

The first step to understanding the market begins with Chinese President Xi Jinping’s so-called “xin chang tai” policies, which literally means the days of familiar ways of growth are gone. The policies pursue quality-based sustainable economic growth in the domestic market.

Many Korean exports said such policies are a sign Chinese economic growth has slowed, but the Kotra trade center heads disagreed, saying “the policies are a sign of China’s attempt to advance its growth paradigm.”

Jang Byung-song, head of Kotra’s Chengdu office, said China’s more modest gross domestic product estimate of 7 percent is part of the country’s efforts to pursue a so-called “green GDP,” growth that preserves natural resources and refrains from environmental damage.

Just as the Chinese government promotes value-added industries like IT, energy management and new materials, Korean companies that send electronic devices, steel and chemical products should quickly develop other export models, said Koo Bon-kyung, head of Kotra’s Nanjing office.

Another point the Kotra office heads emphasized was to understand the urbanization of Chinese society, which is quickly expanding to the central and western parts of the country. Beijing has decided to spend at least 7,000 trillion won ($6.5 trillion) in urban development and infrastructure projects under the leadership of Premier Le Keqiang. This opens a vast array of business opportunities for Korean companies, they said.

“Major cities of central and western China like Chengdu, Xian and Wuhan are changing so quickly that people often describe them as cities where new buildings appear overnight,” said Jang of Chengdu office. “This means that demand for derivative industries, like construction materials, home appliances and consumer products, is also on the rise. The Chinese central government wants foreign companies to settle there.”

One of infrastructure projects being pushed there is the so-called “One Belt, One Road” project, which the central government launched in 2013 to eventually connect China’s eastern cities to Central Asia, Africa and Europe countries.

“Projects like this are closely related to the Asia Infrastructure Investment Bank, which Korea recently joined, and therefore hold large business potential, particularly in areas like infrastructure construction, shipping, retail and tourism.” said Park of the China business support division.

Another tip from Kotra’s China office chiefs is to focus on services and e-commerce, as urban Chinese in their 20s and 30s have emerged as a new large consumer group.

“Young people born in the 1980s and 1990s are the new big pockets who care more about innovation and design than price, and prefer to shop online,” said Yoon Hyo-choon, head of Kotra’s Beijing office, adding that targeting the requires Korean companies to provide more convenient e-commerce services.

“Even if a company already has retail route in China, it should additionally strengthen online business by launching online-exclusive products,” said Lee Min-ho, head of the Shanghai office.

BY KIM KI-HWAN [kim.jiyoon@joongang.co.kr]

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