South Korea Goods are Good In China

SHANGHAI, July 10 Godwin Chellam writing for Reuters reported that South Korean President Roh Moo-hyun gave a big plug for stronger China-Korea business cooperation in the financial hub of Shanghai on Thursday, but analysts and industry executives say he didn't need to.

Despite the ever-present threat of trade spats, like the one that erupted over garlic, mobile phones and raw chemicals in 2001, China is South Korea's number two export market and could soon overtake the United States for pole position, they said.

Korean giants from Samsung to Posco seem to have their finger on the pulse of Chinese customers, because they understand local tastes and their products have better technology, analysts said.

Still, there's scope for deeper cooperation between the two giant North Asian economies, Roh said at the end of a four-day tour of China during which North Korea's nuclear ambitions seemed to overshadow economic concerns.

"Closer exchanges are required in the fields of energy, the development of resources, finance, the environment and such future high-tech sectors as next generation information technology and biotechnology," Roh told a business forum.

From Samsung Electronics Co's stylish cellphones and LCD monitors to Hyundai Motor Co's (KSE:05380.KS - News) cars, Chinese consumers seem to have an increasing appetite for Korean goods.

China accounted for 14.6 percent, or $23.8 billion, of South Korea's 2002 exports versus 20.2 percent for the United States.

But that gap is narrowing. China absorbed 17 percent of South Korea's first-quarter exports compared with 18 percent for the United States.

"China and Korea are more closely linked in terms of geography and history, and we are familiar with the culture here," said Sohn Jung-youl, steel maker POSCO's China representative.

"So you see Koreans, and the Japanese, communicating better with the Chinese compared to the Europeans and Americans."

South Korea is investing more in China as a result. Utilised foreign direct investment rose to $2.7 billion in 2002 versus $2.1 billion in 2001.

"Korean companies don't need help penetrating the Chinese market," said Michael Spencer, an economist with Deutsche Bank.

PHONES, MONITORS AND CARS

From raw materials like steel to finished products like liquid crystal display panels, Korean companies have stamped their footprint on business in China.

POSCO, the world's third-largest steel maker, is set to unveil a tripling in second-quarter net profit due to higher prices linked to bubbling economic growth in China.

"Companies like Samsung have done very well because their marketing is better and they design products specifically for the Chinese," said Andy Xie, economist at Morgan Stanley Dean Witter.

"Chinese tastes are also very similar to Korean tastes."

Hyundai Motors, the world's eighth-largest auto maker, hopes to sell 300,000 vehicles by 2005, Xu Heyi, the venture's chairman, said late last year, chasing a market that saw sales break the one-million mark for the first time in 2002.

But Samsung may be the best-known success story.

A spokeswoman said Samsung, now nipping at leader Motorola Inc's heels in the world's top cellular market by subscribers, expects China sales to rocket more than 56 percent to $10 billion this year.

It has won approval from the government to set up research centres around the country to develop chips for computers, mobiles and even toys.

"When Samsung first came to China, we didn't understand domestic conditions and lost money. That situation doesn't exist anymore," Yin Zhonglong, Samsung's deputy head, said in a televised interview with China's Central Television.

"China is now our largest market in terms of investment."