China’s South Korean firms mull over whether to stay or go as Covid, geopolitical pressures mount

Korean trade group says China’s role as a go-to source of production among global companies has diminished over the last five years, but still remains important

‘The era of competitive trade protectionism’ is expected to see stable value chains increasingly prioritised over cheaper and more efficient ones like China offered for decades

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TCL Tonly took over a former Samsung factory at the Jinxinda complex in Huizhou, Guangdong province. Photo: He Huifeng

Published: 5:30am, 23 Apr 2022Updated: 6:02am, 23 Apr 2022

With its cheap and abundant manpower, China has long relished its role as the so-called world’s factory, offering lower production costs to lure global brands and retain domestic manufacturers for decades.

But a gradual rise in expenses, such as labour costs, has been weakening China’s role as a go-to source of production for companies over the past five years, according to a new report by the Korea International Trade Association.

Multinational firms are being increasingly pressured to move production away from mainland China to destinations such as Taiwan, Malaysia and Indonesia, the association said.

That includes some of South Korea’s largest businesses, including Samsung, LG and Hyundai Motor, which have relocated factories from mainland China to Southeast Asian countries such as Vietnam and Indonesia in recent years.

The trend to relocate production began years ago and was further fuelled by desires to avoid tariffs stemming from a trade war between China and the United States. Then came the pandemic.