Targeting China’s sweet spot

Looking into the mind of a state leader is like reading the policy direction of the country, especially if you are talking about Xi Jinping’s mind and socialist China.

On March 10, the People’s Daily published a lecture by Xi on two pages. The 20,000-word article contained the specific economic views of the Chinese president. At the core was structural reform on the supply side, with two key points.

First, he asked why China cannot make top-quality daily necessities, as China imports even toilet covers. He offers a solution: innovation customized to consumer demand. “Companies that once dominated the Chinese market, such as Motorola, Nokia and Ericsson, have disappeared now,” he wrote, “and this is the result of successful innovation by Chinese mobile phone companies.”

Xi’s “structural reform from the supply side” can be interpreted as “improve quality to drive out foreign products dominating the Chinese market.”

When Huawei sued Samsung Electronics for patent infringement last week, I was reminded of Xi’s argument. “What Xi really wanted to talk about was not Motorola or Nokia,” I thought. “The companies he wants to drive out are Samsung and Apple, and the Huawei case is an embodiment of this.”

Huawei is not just another electronics company. China has solid fundamental technologies thanks to its military. The country has only fallen behind in commercialization and marketability.

Huawei founder Ren Zhengfei is a former People’s Liberation Army officer. He knows the power of basic science and technology better than anyone. His goal was “technology first,” and Huawei has become the top patent holder in the world. It went far ahead of rivals like Xiaomi and Lenovo, which pushed Samsung out of the Chinese market, with the power of technology.

Now, Huawei is targeting Samsung directly. China’s technology is aiming to take on the Korean economy. It will be an exhausting battle, with a higher chance of victory for Huawei than Samsung. Huawei’s lawsuit has hidden motives. It wants to grow one size larger through viral marketing. Samsung used this strategy against Apple and will have a hard time dealing with the attacks. Samsung is not the only target. There are companies like Huawei in other industries, from home appliances to shipbuilding, steel to chemical. How should we respond to Huawei and China?

We can find a clue back in Xi’s words. He discussed the immense purchasing power of the 1.4 billion Chinese people. “In 2014, Chinese tourists spent 1 trillion yuan [$150 billion] on overseas travel, buying cosmetics, clothing, baby formula and even baby bottles,” he said. We have to target the most vulnerable spot of the enemy. Chinese people now appreciate and enjoy food, entertainment and fashion, areas where Korea has a clear edge.

First, in terms of food, China is known for substandard food quality and safety. Chinese people are interested in safe food from developed countries. During the Singles’ Day shopping spree in November, inventories of baby formula from an Australian company were sold out, and company’s stock prices went up tenfold in one year.

Korean companies can be just as successful. The bakery chain Paris Baguette has successfully established its high-end image, and Haejichon promises “reliable food and ingredients directly imported from Korea.” Korea also has a geographical advantage as the closest to picky Chinese consumers. Korea has to establish itself as the world’s best food market, and Chinese consumers’ desire will soon follow.

Second, Korean Wave tourism has only just begun. The Chinese are new to the pleasure of discovering the world, and they are changing the map of global tourism and entertainment. Affordable tour products are not enough. Korea needs to develop original products to make solid profits using Korean pop culture. Through joint ventures and collaborations with China, we need to expand the pie and lower the obstacles. We shouldn’t unnecessarily fear Chinese capital because of how much soft power we have.

Third, Chinese people are increasingly interested in beauty. Korea’s cosmetics and plastic surgery industries have synergy. Among the medical tourists visiting Korea, Japanese are interested in Oriental medicine, while Americans and Europeans focus on treating serious illnesses.

In contrast, Chinese visitors spend money mainly on cosmetic surgery. We can offer safe and enjoyable plastic surgery experiences. Most of all, the process of allowing Chinese brokers to take excessive commissions on Korean medical services contractors should be changed.

The bigger Chinese market will open when regulations are removed. Wouldn’t it be nice to see Chinese people dolled up with Korean products and services?

JoongAng Ilbo, June 2, Page 30

*The author is an editorial writer for the JoongAng Ilbo.

Yi Jung-jae