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‘Made in China’ is no longer a joke

Korean companies must change their view. Chinese products are no longer a joke.
May 26,2017
It wad not so long ago when South Koreans condescendingly mocked Chinese smartphone makers for finally learning to make good copycat smartphones. But nobody is laughing now. Chinese brands are armed with proprietary technologies and are preferred over Korean counterparts for their features as well as affordable prices. The Chinese economy is the world’s second largest, after that of the United States, and consumer prices have jumped. Having a foot massage that used to be $10 now costs $30. Soon, a foot massage in China will be a luxury.

Chinese names have become strong in the traditional strengths of South Korea — shipbuilding, steelmaking, electronics, IT, semiconductors and motor vehicles. Samsung Electronics has become a minor player in the Chinese smartphone market, ranking 8th with a pitiful 3.1 percent share in the first quarter. Samsung Electronics has been making record quarterly earnings, but cannot be sure about its future starting from 2020, said a company official.

The automaking front is equally shaky. Many had bet China would never go far in the automobile market, an industry hinging on stable supply in over 20,000 parts and components, as well as building brand credibility and safety reliability. But that thinking has been proven to have been arrogant. Chinese producers with the benefit of unrivalled market size and scale of economies have become powerful after they advanced technology. Hyundai Motor, whose sales have been waning from last year, is doing worse this year.

Chinese brands capitalized on the boycott campaign against Korean brands after Seoul defied Beijing warnings and decided to install the U.S. Terminal High Altitude Area Defense (Thaad) system. Sales from Hyundai Motor’s Chinese factories plunged 46 percent in the first quarter against the previous quarter. Its loss was their gain. No matter how hard it tries, Hyundai Motor won’t likely reclaim its past strength in the Chinese market.

Top players are dominated by powerful foreign brands. The joint ventures with Volkswagen, General Motors and others command the leading group of four. Hyundai and its sister brand, Kia Motors, have been trying to get into the front-running group. There are about 50 Chinese car brands. They are competing for the top local rank with a pipeline of sedans, sports utility vehicles, vans and buses. Top players are Chang’an Motors, SAIC, Dongfeng, First Automobile Works, Beijing Automotive Group, Guangzhou Automobile and Geely. Great Wall Motors, named after China’s famous landmark, is the local bestseller of SUVs.

China is the world’s largest motor vehicle market. A carmaker cannot expect to do well elsewhere if it does not make it in the Chinese market. Since 2008, China is not only the world’s biggest producer of cars, but also the largest buyer. It is easy to enter the market due to relative lenient regulations. BYD was able to join the global rank in electric cars thanks to its remarkable ascent in the domestic market.
China partnered local producers with foreign makers in the 1980s and 1990s to help them secure the basic infrastructure and technology. From the 2000s, local brands began to gallop along on their own.

They gained another boost through a government-sponsored five-year economic development program in 2016. Under Beijing’s 13th roadmap, Beijing shifted industry policy to the promotion of stand-alone local producers from the past expansion in capacity. Chang’an and Great Wall, with popular reputations at home, benefited most. Hangzhou-based Geely, which bought Swedish household name Volvo, announced recently that it was acquiring British sports car brand Lotus. It is also ready to roll out its independent label in overseas market.

No one can look down on Chinese cars anymore. A half a century ago, Toyota was ridiculed in the United States. Today, it is a global brand. The biggest consumers in China were born after the 1960s and have grown up in a market economy. They began earning when China opened up under Deng Xiaoping’s reform policy. They are practical yet patriotic. Samsung Electronics phones have already been abandoned. Hyundai and Kia cars could be next. Korean companies must change their view.

Chinese products are no longer a joke.

JoongAng Ilbo, May 25, Page 34

*The author is an editorial writer of the JoongAng Ilbo.

Kim Dong-ho