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  • KITA revealed 88% Korean companies with business operations in China are suffering losses due to Chi
    2022-07-04 hit 362

    KITA revealed 88% Korean companies with business operations in China are suffering losses due to China’s aggressive Covid lockdown measures


    KITA Shanghai Center conducted a survey on the extent of damage faced by companies and revealed pressure on investment and employment will mount over time.

     

    The Korea International Trade Association Shanghai Center surveyed 177 Korean companies with business operations in China to assess the extent of damage these companies experienced during the lockdown period in key areas, including Shanghai. The result was released on June 27 in the form of a report and it revealed that a vast majority of them - 88.1% of them were affected by Covid lockdown measures implemented by the Chinese government, which brings the needs to provide support for affected companies to minimize losses.


    The report revealed that 88.1% of the respondents experienced “financial losses or negative consequence during the course of performing their business activities.” 97.4% of respondents said sales declined during the first half of this year and 31.4% of them said their sales plummeted by more than 50% compared to the performance a year ago. 95.5% of respondents forecasted diminishing sales throughout the second half of this year. During the first half of this year, 69.9% of respondents said they scaled down investment and 66.7% of respondents said they are hiring fewer people and they anticipated the situation will aggravate during the second half of this year with 70.5% of respondents predicting a contraction of investment and 67.3% forecasting a decline in hiring. The report forecasted, “Investment and employment will likely see mounting pressure over time.”


    It was also revealed that China’s aggressive Covid restrictions are particularly hindering in-person business activities. 16.8% of respondents were affected by movement restrictions, another 16.8% of respondents experienced difficulties in performing sales promotion and marketing activities and 15.9% of respondents experienced logistics and supply chain disruptions. When asked about how much their business performance has returned back to normal after restrictions were lifted, 41.5% of respondents said their business has recovered to less than 50% of pre-restriction levels and a staggering 22.4% of respondents said their business has recovered to less than 30% of pre-restriction levels. This figure showed a big gap between manufacturing companies and non-manufacturing companies. 68.3% of manufacturing companies said their business has recovered to more than 70% of pre-restriction levels, whereas merely 28.3% of non-manufacturing companies responded they managed to reach this level, which indicates more than a double of non-manufacturing businesses are disproportionately affected compared to manufacturing businesses.


    The report described, “Considerable time will be needed for non-manufacturing companies to put their business back on track as movements are still restricted and face-to-face customer service is limited despite lifting of lockdown measures in Shanghai.” In response to a question on plans to maintain business in China, the survey revealed 55.3% of respondents have plans to scale down, suspend, pull out business operations in China or relocate their business elsewhere. Only 35.9% of respondents said they intend to adhere to their original business plan and only a fraction of respondents - 7.3% - said they plan to expand business operations in China. The report also discovered Korean companies with business operations in China expect the following from the Chinese government: a) the predictability of the Chinese government’s response to the Covid pandemic, b) distribution of financial subsidies, c) tax deductions and d) discounts on rent.


    Seon-young Shin, the Head of the Korea International Trade Association Beijing Center stressed, “The Korean government and relevant institutions should notify the Chinese government of the extent of damage Korean companies are experiencing and insist on the necessity of providing assistance to compensate for the loss in order to boost mutual economic cooperation.” The Head also added, “It will be a smart move collaborate with other foreign companies in China in making this request as a vast majority of foreign companies in China are experiencing similar difficulties and suffering losses our companies are experiencing.”

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