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Not the 'mistake of the continent' anymore

Published: 03 Oct. 2024, 19:57

HAN WOO-DUK
The author is a senior reporter of the China Lab.

It is scary. When “Made in China” products pile up in a port, the related industry in that country falls into a crisis. Such was the case with Chinese steel at a port in South America. According to foreign media, Chile’s biggest steel mill Huachipato recently shut down its plant because of cheap steel from China. More than 20,000 employees are about to lose their jobs.

There are many such examples. Chinese solar panels that appeared in European ports devastated the solar industry in Germany and Italy. Now, 97 percent of European solar panels are imported from China. Even Thailand, a country with low-wage workers, is experiencing a manufacturing crisis due to products from China. The world is frightened of China’s “export of deflation.”

The fear doesn’t end at cabbage prices. China’s technological rise is driving advanced traditional companies into a corner. Automobile powerhouse Germany is also within range.

German automakers are now uneasy over Volkswagen’s decision to shut down its plants in the country for the first time in the history of the company. The company’s management insists that it is an inevitable choice despite strong opposition from labor unions. Nevertheless, the company is increasing its investment in China. Volkswagen — which invested $2.7 billion dollars in a plant in Hefei, Anhui Province, in May — is developing an electric vehicle (EV) model in a joint venture with China. While EVs made in China are piling up at European ports, cars other than EVs are not sold in the Chinese market. Therefore, Volkswagen made the decision to shut down its EV plants in Germany and expand its investment in China. China was behind Volkswagen’s “inevitable choice.”

In the case of Korea, low-priced Chinese products rushing through platforms such as AliExpress and Temu are driving Korean small- and medium-sized manufacturers relying on domestic consumption into crises. As Pyeongtaek Port becomes busier, Korea’s small and midsize enterprises are being pushed to the brink.

China’s technological pursuit threatens the structure of the intermediate goods trade that helped both countries’ industries. China is no longer buying parts for mobile phones or cars from Korea. The division of labor based on the principle of “high-value products from Korea and low-value products from China” was broken long ago. This is a harsh reality facing Korea’s petrochemical industry.

Korean smartphones are being threatened as Huawei introduces a foldable phone that can fold twice. Even in the memory chip sector, China is gradually digging into Korea’s stronghold on general-purpose chips. In other words, all of Korea’s competitive — and more lucrative — industries face an unprecedented crisis.

Korea underestimated China’s cost-effective products simply as the “mistake of the continent.” Not anymore. Today, Chinese products are called the “fear from the continent,” not the “mistake.”

The author is a senior reporter of the China Lab.