Take the Money and Run … to South Korea
March 4th, 2008 | by This is China! |It’s not just the Hong Kong and Taiwanese companies in Guangdong that are closing up shop due to increased costs of doing business and/or they’re just cheap with workers, as I had written a couple days ago in my post Take the Money and Run: South Chinese Factory Closures.
Beijingreview.com reports:
“On January 12, some 10 South Korean executives at Segang Textile in Yantai, Shandong Province, fled in the dead of night, leaving behind unpaid debts and a venture with about 3,000 workers, according to the Beijing-based newspaper Global Times. In terms of the employees, Segang Textile is the largest South Korean-invested company whose management has recently fled China. The company, which started operating in Yantai in early 2001, is mainly engaged in making clothes, dyeing fabric and processing fiber.”
South Koreans are a tough lot, but in the face of an angry Chinese mob (probably emboldened with a bit bai jiu):
“Global Times quoted sources as saying that contractors and lenders to whom the company owed money broke into Segang Textile on January 11, demanding that they be paid. Segang Textile owes 30 million yuan ($4.2 million) to local contractors and 15 million yuan ($2.1 million) to banks. Believing that their safety was under threat, the South Koreans packed their bags for a hasty departure.”
Interestingly, the evacuation of South Korean SME’s seems geographically limited in scope, their industries confined to the secondary light industries:
“South Korean Government investigations show that all business withdrawals are taking place in east China’s Shandong Province. Geographically close to South Korea, the province is a popular destination for South Korean investors. In Qingdao, a port city in Shandong that is home to about 6,000 South Korean-funded businesses, between 30 and 50 Korean-run factories close each year. Most of the companies that quickly shut down after their executives leave unexpectedly are small labor-intensive firms that produce food, leather, clothes and toys.”
Oddly, the South Korean exodus of SMEs in North China sounds freakishly like the story of their Asian cousins in South China:
“…95 percent of the South Korea-invested firms in China are technologically unsophisticated, labor-intensive, highly polluting and energy-consuming small and medium-sized enterprises-sunset businesses that cannot survive in South Korea. Many of them locate their production bases in China to take advantage of cheap labor resources and various preferential policies for foreign-funded enterprises, then sell their products in South Korea. Given the large potential profit margins, they have been reluctant to improve their management and enhance their competitiveness.”
Which all goes to show: many of the shakeouts and consolidations attributed to: a) the Blizzard of 2008, b) the strengthening of the Yuan, c) the slowing consumer demand in the States and the European Union might have been avoided by a fair number of these companies if they simply hadn’t squandered profits. All these years many of them could have been making their operations more efficient, improving the skills and pay-scales of their staff, and developing new, higher-value product lines.
But then, that wouldn’t have been much fun, would it?
