Korean businesses thrive on rivals’ spat

A Chinese man holds up a banner that writes “We are protesting against Japan. Let’s protect our islands” during a rally in front of the Japanese Embassy in Beijing on Sept. 18. (Photo : Yonhap)

Chinese consumers shun Made-in-Japan products

BEIJING ―­ Korea’s companies are benefiting from an ongoing territorial spat between the governments of its two giant neighboring nations ― China and Japan ― over the Diaoyu islands, also called Senkaku in Japan, a government researcher at China’s Ministry of Commerce (MoC) said.

“The intensifying territorial dispute between China and Japan is enabling more Korean products to sell in the Chinese market because consumers’ preference here for Japanese products has declined,” said Liang Ming, a senior researcher at the state-run Chinese Academy of International Trade Economic Cooperation (CAITEC) affiliated to the MoC, in an interview with Korean reporters at CAITEC’s headquarters in Beijing, last week.

“Global economic downturn is partially responsible for Japan’s fall, but the territorial fight surely played a big part in the decrease of China’s import of Japanese products.”

The rising economic powerhouse has maintained growth in its imports throughout the year when other nations’ were experiencing a squeeze in domestic consumption due to the global economic crisis.

China-Japan relations have hit a rough patch following Tokyo’s announcement of its plan to nationalize the disputed islands earlier this year stirring hostile nationalistic sentiment against Japan inside China.

The situation exacerbated after the Japanese government acquired three of the islands in September. The move led to countless nationwide protests and boycotts of Japanese brands.

In particular, Chinese sales of Japanese automobiles have suffered the most from the fallout from the islands row. Chinese sales of Toyota, one of the world’s best selling Japanese automakers, were down 44 percent and 49 percent year-on-year in September and October, respectively. Though its decline slowed in November, the company is still having a hard time recovering its previous level.

In contrast, its Korean rival Hyundai Motor’s September and October sales in China climbed 15 percent and 37 percent, respectively, compared to last year.

As demand evaporates in China, other Japanese automobile makers such as Nissan, Honda were also forced to cut back production.

According to the Chinese institute’s official statistics, Chinese overall import of Japanese products from January to October this year fell 6.8 percent year-on-year. During the same period, import of Korean products increased by 2.1 percent.

“If the trend continues like this Korea could possibly become China’s No. 1 importing country,” said Liang.

Japan is currently China’s No. 1 importing nation trailed by Korea.

In addition, Liang said the fact that Japan’s main opposition right-wing Liberal Democratic Party (LDP) is likely to win in the Dec. 16 election there, sales of Korean products in China will gain an additional boost.

In the LDP manifesto, presented earlier by its leader Shinzo Abe who is considered the most likely candidate to become the next prime minister, the party pledged to permanently station public servants in the disputed Senkaku Islands and take steps to improve the fishing environment for the Japanese sailor in waters around the islands.

Many experts expect China-Japan ties to be strained even more after the LDP comes into power.

“Amidst the global economic crisis, bilateral trade volume between Korea and China remained strong,” Liang said. “To this account, China also thinks highly of the bilateral trade with Korea. We expect the numbers to stretch even more when the free trade agreement (FTA) is signed.”

“Korea is competing with Japan in the Chinese market in a vast range of manufacturing sectors from Information Technology products to automobiles and steel,” said Lee Won-hee, a researcher at Samsung Economic Research Institute. “If Chinese consumers don’t prefer products made in Japan any more due to the spat, they will choose Korean products as an alternative.”

Since surpassing the United States in 2003, China remains Korea’s largest export market accounting for 24.2 percent in 2011.

Korea-China FTA

Yuan Bo, a deputy director at CAITEC, said China’s new leadership led by Xi Jinping, will strive to seal the ongoing FTA negotiations with Korea.

“In the new report delivered at the 18th National Congress of the Communist Party of China, it clearly states that the new leadership will push forward FTAs,” said Yuan. “To be specific, China’s policy is to prioritize relatively uncomplicated agreements.”

The director said, in this regard, China will focus on the Korea-China FTA more than the trilateral FTA that includes Japan.

China currently has 10 FTA partners including the Association of Southeast Asian Nations (ASEAN).

Last month, Korea, China and Japan have launched negotiations for a three-way free trade agreement.

CAITEC researchers said despite the three nations’ promise to keep the principle of “separating economy and politics,” it is hard to imagine the ongoing territorial dispute between the three nations will not impact the trilateral FTA.

Seoul and Tokyo ties have also been strained lately due to the latter’s claim on Korea’s easternmost islets, Dokdo. Japan is threatening to take the issue to the International Court of Justice to decide which nation is the rightful owner of Dokdo, a legal dispute that Korea flatly refuses to enter.

The islets are effectively controlled by Korea with a small police force detached there.

“Plus, we also expect that many other obstacles are pushing forward for the China-Japan-Korea FTA as all players are only seeking to protect their markets while urging others to open up,” Yuan said.

Korea-China partnership

Against the backdrop of Japan’s right-leaning, Chinese foreign ministry spokesman Hong Lei said it would be a good idea for Korea and China to cooperate and press Japan.

“Pressing Japan in a united form is in accordance with China’s stance,” said Hong at the headquarters of Chinese Ministry of Foreign Affairs in Beijing. “The victimized nations should jointly prevent Japan of its move to deny its past atrocities and of military expansion.”

Koreans and Chinese consider Japan’s claims against the territories as a revival of its past imperialism.

“The Chinese empathize with the Dokdo case,” said Lee Kyu-hyung, Korean Ambassador to the People’s Republic of China. “They understand it right away with a simple explanation of the Dokdo case. The two cases are similar situations.”

During the imperial era, Korea was colonized by Japan for 35 years (1910-1945) and China was also invaded during this period.

In line with the historical background, the two nations have long criticized Tokyo’s nationalistic activities such as paying official visits to the Yasukuni Shrine, where war criminals are honored, and publishing history books that glorify its militaristic history as well as laying apparently groundless claims to Dokdo and Diaoyu.

Experts say that China’s support would greatly help Korea in pressing Japan to properly apologize and compensate Korean women who suffered sexual enslavement under the imperial Japanese army and men who were forcefully mobilized to work for Japanese wartime companies during the colonial rule.

As a past single case of a China-Korea partnership, they have joined hands on the international stage to successfully thwart Japan of its attempt to become a permanent member of the United Nations Security Council in 2004.

“It has only been 20 years since Korea and China established diplomatic ties but the relationship has developed so quickly,” said a senior Chinese foreign ministry official on condition of anonymity. “The reason for such development is that people of the two nations share similar history and experience. China-Japan relations and China-Korea relations are not the same. Regardless of the straining China-Japan relations, China-Korea relations will continue to develop.” <The Korea Times/Chung Min-uck>