[Inside Chodong] Korea Permeates Vietnam... Time to Heed Painful Lessons from China

[Asia Economy Reporter Park Sun-mi] The first digital billboards that people encounter upon arriving at the international airport in Ho Chi Minh City, the economic capital of Vietnam, are those of Hyosung and Shinhan Bank. Once outside the airport, Samsung Electronics' Galaxy Z Flip4 advertisements stretch along the roadside. The Korean presence felt from the airport is proof that Korean companies and Koreans have already deeply permeated Vietnam.

In the Binh Thanh district of Ho Chi Minh City, where Vietnam's tallest 81-story skyscraper 'Landmark 81' is located, a new Koreatown has formed. The signs lining the most affluent area in this district belong to Korean companies. These include Tous Les Jours, which holds the number one position in Vietnam's bakery market, GS25 convenience stores with over 200 locations in the region, and Woori Bank, which has achieved its highest performance since establishing its Vietnam branch in 2017. There are also K-Mart stores that look like Korean supermarkets transplanted directly, and restaurants that have Korean signage without any Vietnamese text. The instant tteokbokki corner inside GS25 convenience stores is more popular among Vietnamese customers than Koreans.

This recently established Koreatown in Ho Chi Minh City contrasts sharply with the increasingly declining Koreatown in Beijing, China. Known as 'Wangjing,' Beijing's Koreatown saw a rapid change in atmosphere following the 2017 THAAD (Terminal High Altitude Area Defense) incident, which sparked strong anti-Korean sentiment in China. Once home to about 120,000 Koreans, Wangjing lost its Korean character completely after the THAAD incident and China's 'Zero COVID' policy. The 'Korean Town' building, which housed many Korean restaurants, had its signs removed, and as companies gradually exited China, Korean expatriate neighbors were replaced by Chinese residents. Restaurant owners who sold Korean food left Wangjing and established new bases in Vietnam.

Even looking at trade balances reveals how rapidly relations between Korea, Vietnam, and China are changing. Last year, Vietnam became Korea's largest trade surplus partner for the first time ever. The trade surplus with Vietnam reached $34.2 billion last year. In contrast, China, which had been Korea's largest trade surplus partner, has now become the largest deficit partner. Korea's trade balance with China turned negative in October last year and has remained in deficit for four consecutive months through January this year.

Korean companies, realizing that doing business in China is no longer easy, are now turning their attention to Vietnam. Samsung Electronics produces more than half of its smartphones in Vietnam and recently established the largest research and development (R&D) complex in Southeast Asia. Samsung Electro-Mechanics also made a large-scale investment worth 1 trillion won in its Vietnam branch and began operating a semiconductor parts production plant in Vietnam this year. Samsung accounts for 20% of Vietnam's total exports.

Vietnam is the perfect escape route from China, which initially courted foreign companies, including Korean ones, to earn the title of 'the world's factory,' but then completely reversed its stance once its goal was achieved. With half of its population under 35 years old, Vietnam is a 'young country' with low labor costs, making it an ideal replacement for aging China as the world's factory.

However, Korea, which is rapidly embedding itself in Vietnam, must remain cautious. It must not forget that the situation can change at any time. The resignation of Nguyen Xuan Phuc, a prominent pro-Korean politician in Vietnam, and the close relationship between Nguyen Phu Trong, the top-ranking Communist Party Secretary, and China are points to watch carefully. Although Vietnam has been trusted as the closest neighbor, it is time to recall the lessons from China, whose relationship with Korea can now only be explained by the word 'retaliation.'