Bond Grows Between China, South Korea

Times Staff Writer

After living in Seoul; Frankfurt, Germany; Los Angeles; and Beijing, Kim Hyun Soo decided to retire here, a port city in China's Shandong province that juts out toward Korea.

The 69-year-old South Korean knew it would be economical. He pays about $75 a month for a full-time housekeeper, and a haircut costs 60 cents, shampoo included.

What Kim never expected, though, was just how friendly locals would be toward Koreans. From the day he moved into his third-floor apartment two years ago, when a neighbor lent him a set of keys for the front gate, Kim has felt right at home.

"Even though they don't like Japan, they don't have such feelings about Koreans," says Kim, a former government worker. "They wear Korean-made clothes. They watch Korean drama. They understand us."

Kim's experience reflects blossoming goodwill between South Korea and China, stemming from their growing economic, political and cultural ties. The partnership signals profound shifts throughout the region -- with implications for U.S. business and political interests here.

The Chinese call the trend Han liu -- or "Korea current." It refers to the spread of Korean TV shows, music, online games and other pop culture in China. Perhaps most of all, it speaks to the big economic wave. Hyundai became China's top car brand in the first quarter; Samsung cellphones fill the airwaves; LG microwave ovens are in many Chinese kitchens.

In all, South Korean companies invested $6.25 billion in China last year, behind only Hong Kong and Britain and overtaking Japan for the first time, according to China's Commerce Ministry.

The investments came from giants such as Samsung, which plowed $700 million into China last year, as well as hundreds of smaller enterprises. Auto parts entrepreneur Lee Hee Hyung, 48, spent $2 million to build a 160,000-square-foot factory in Weihai's export zone. City officials threw in 10 free acres of land and offered sales tax exemption for three years.

The big draw, of course, was China's low labor costs. Lee's Weihai plant now employs about 180 workers, who earn on average $120 a month. Even at wages 10 times that amount, Lee says he struggles to fill jobs at his two South Korean factories in Kyungsang province. "It's so hard to get workers in Korea," says the chief executive of Guyoung Technology Co.

In 2002, China surpassed the United States as South Korea's largest export market. And last year, China pushed ahead of America to become South Korea's largest bilateral trade partner, with $79 billion of goods flowing between them, according to figures from the U.S. State Department.

The booming commerce comes between two nations that battled each other in a war five decades ago and that only 13 years ago established formal diplomatic relations. During much of the 1990s, many people here and in other parts of China looked down on Korean visitors, regarding them as cutthroat and dishonest in business. Although some of those sentiments persist, the predominant attitude toward Koreans now appears to be more neighborly, especially among younger Chinese.

Liu Deyun, a 23-year-old with streaks of dyed brown hair and silver sneakers, is one of several hundred Chinese studying Korean at Shandong University's campus here. Asked why, he offered a simple answer in Korean: "After I graduate, it'll help me to get a good job."

The strengthening China-South Korea ties are being driven by China's dramatic rise, which has rippled throughout Asia. Even as South Koreans draw closer to their giant neighbor, Japanese investors are considering pulling back from China amid increasing friction between the two nations.

The South Korea-China union has contributed to the isolation of North Korea, China's communist ally, and in some analysts' view chipped away at the influence of the U.S., long the region's most important political and economic force.

"Closer economic ties between the two countries will definitely decrease [South] Korea's necessity to seek military protection from the U.S. and will more and more weaken their cooperation on a political basis," says Shen Dingli, deputy director of the Center for American Studies at Shanghai's Fudan University. "That is what the U.S. doesn't want to see."

From the start, much of South Korea's investments in China have been steered to Shandong province because of its proximity to South Korea. More than $10 billion of South Korean investments have flowed into the province in a little more than a decade. Tae Won Chey, chairman of SK Group, one of South Korea's leading conglomerates, says it's understandable that the two nations are forging closer bonds.

"Sino-Korea relations date back 5,000 years," he says, speaking at a recent economic forum in Shanghai. "Our people can understand and cooperate with each other better than any other people in the world."

Certainly the Chinese seem to understand Korean soap operas. All 164 segments of "Mermaid Lady," a complicated love story involving a girl abandoned by her father, were shown late at night last fall. By viewers' demand, it aired again this spring in early afternoon and still recently garnered the No. 2 ranking among all TV dramas on CCTV, China's national network.

"Chinese and Koreans have a lot in common in their ideology system. Both countries are based on Confucian philosophy," says Han Zhenqian, a professor at the Korea Research Center at Peking University in Beijing. "So lots of plots and conflicts in Korean dramas can be easily understood by Chinese audiences, such as stories of parents interfering with children's marriage."

The trade links, though, were perhaps inevitable, Han suggests. China has a large market, cheap labor and abundant resources. South Korea has limited land, increasingly expensive labor and almost no natural resources. South Korea offers two things China wants most from foreigners: technology and capital.

Measured by per capita gross domestic product, China is where South Korea was in the early 1970s. But it figures to catch up fast. China's strategy, though similar to South Korea's in its focus on exports, high savings and infrastructure, has been more aggressive in seeking and opening up to foreign investments.

At the moment, the two nations' economic interests remain largely complementary. But analysts see the day when that could change.

"Today's South Korea is tomorrow's China," says Zhao Jianglin, vice director of Asia Pacific Study at China's Academy of Social Science in Beijing. But as China builds its technological capabilities, she and Korean analysts agree, the gap will narrow and the two could become major competitors, particularly in electronics.

The one to catch is front-runner Samsung Group, which has invested $3.6 billion in China over the years. The company now operates 29 factories in mainland China, employing 50,000 workers producing computer chips, home appliances and flat-screen monitors, among other things.

In Weihai, Samsung has its own road named after it. Blue and white company signs decorate street lampposts that lead to Samsung's campus, with its sleek glass building and plant, where computer printers are made. After Samsung's arrival in the mid-1990s, 30 more Korean electronic companies set up shop nearby as suppliers.

Electronics, auto parts and garments are the top three industries among the almost 3,000 South Korean companies that have been identified by Weihai officials. Collectively, the companies account for more than half of the city's tax base and employ 105,000 workers, according to Chung Sung Gu, president of the Korean Society and Enterprise Assn. in Weihai. "It's been good for the city and for us," he says of the relationship.

Not everybody would agree with that. But many others have come to accept, if not rely, on Koreans for their livelihoods.

Guang Ming Road, a narrow downtown street, is teeming with restaurants, bars and foot massage parlors catering to Korean customers. The smell of kimchi -- pickled cabbage -- and other Korean and Chinese food wafts through the air.

"Business isn't bad, but it'd be better if we spoke Korean," says Zhang Wei, manager of Oasis Massage Center. Her best days are Sunday, Tuesday and Thursday, she says. The reason: That's when the big passenger ferry from Inchon, Seoul's port, arrives in Weihai, typically unloading 300 to 400 Koreans each time.

Some emerge from the ferry station lugging big sacks filled with vitamins, clothes and other goods to be sold in markets nearby. Others come as tourists or to work, study or get away from the hectic pace of life in South Korea's crowded cities. These days, Weihai's clean air, brown sandy beaches and green parks seem to be as much a draw to Koreans as business opportunities.

Choi Hyun Mook, 55, came out here three years ago from Seoul to open a plant for Suhyang Co., a maker of premium children's clothes. Suhyang had pretty much outsourced all of its work to contractors in South Korea and elsewhere. But the company decided it was worth a try in Weihai. It takes just eight hours -- compared with 14 days from Vietnam -- to ship raw materials in from Inchon and just as long to send finished goods to South Korea, where all of Suhyang's clothes are sold.

Choi didn't have big expectations. But after more than two years of operations and investments totaling $1.3 million, he says, the quality of the products in Weihai is top-notch. Next year, he plans to source materials in China, which he thinks will boost profit to $1.5 million.

Choi, a thin man with silver-rimmed glasses, says he's proud of the facilities he has built for his 370 employees. He eats with workers and has come to know some of them, as a walk through the factory shows.

When the work gets to him, he heads out to Weihai's scenic coastline. And every now and then, Choi walks down the beach where crowds gather just before sunset every day, when fishing boats come in, and makes a bid on the best catch of the day for a sashimi meal. "There's nothing quite like it," he says.

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Cao Jun in The Times' Shanghai Bureau contributed to this report.

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