[Report] Visiting Tianjin, China... The Title of 'Korean Manufacturing Base' Has Disappeared

Winia Also Sells Refrigerator and Microwave Factory
Tianjin Joins Investment Attraction and Consumption Activation
Korean Association President: "Will Acknowledge Changes and Seek Opportunities"

On the 10th, I visited Styiaochen Street in Nankai District, Tianjin, China. Once a bustling area known as a Korean enclave, the street felt quiet throughout the walk. In the early 2010s, when Korea-China exchanges and corporate investments were active, the number of Korean companies in Tianjin reached about 2,500, but now it is estimated to be only around 750. The decision by major conglomerates to relocate or close some production bases to third countries several years ago had a particularly significant impact. The spaces left by departing companies have all been filled by Chinese pharmaceutical companies, making it impossible to find traces of the former presence. Local Korean residents collectively said, "After the end of zero-COVID, many companies are contemplating whether to continue or withdraw their businesses while observing Tianjin city's economic revitalization policies."

The representative Korean town in Nankai District, Tianjin, China, around Styiao Cheng. During weekday daytime, there are even fewer people passing by, making the streets quiet. (Photo by Kim Hyunjung)

The representative Korean town in Nankai District, Tianjin, China, around Stayaocheong. During weekday daytime, there are even fewer people passing by, making the streets quiet. (Photo by Kim Hyunjung)

Winia also sells factory: "Decoupling from China? Finding alternatives is not easy"

Along with the decisions of large corporations to relocate, Chinese mainland companies have gradually caught up with Korean technology and equipment levels, and many companies are either withdrawing from Tianjin entirely or selling their factories. Samsung Electronics stopped operations of its smartphone and TV factories in 2018 and 2020, respectively, and LG Electronics closed its production subsidiary in 2020.

Recently, Winia, a well-known mid-sized home appliance company, sold all its refrigerator and microwave production factories in Tianjin. The buyer is reportedly Aucma, a Chinese home appliance company operating in the form of a private equity fund. Before the COVID-19 outbreak, Winia Electronics Tianjin subsidiary's annual net profit was around 1 billion KRW, but it sharply dropped to 300 million KRW in 2020, the first year of the pandemic, and turned into a net loss of 4 billion KRW in 2021, struggling financially. The CEO of company A, which operates equipment manufacturing in the Tianjin Development Zone, said, "At one point, the dual lockdown situation lasted long, where we couldn't send goods to Korea nor bring parts from outside," adding, "Even though there were no confirmed cases in the development zone, frequent shutdowns caused most factories, including Winia, to suffer."

Outsiders often talk easily about 'decoupling from China,' but finding alternative business locations is not easy. The CEO of company A explained, "I have acquaintances who moved factories early to Vietnam or Malaysia, but most parts suppliers for finished product manufacturing are still in China, so they faced many difficulties due to supply chain instability after the COVID-19 outbreak," adding, "Besides worker skill levels and labor costs, the ecosystem infrastructure still gives China a competitive edge." Another home appliance parts company B representative said, "Chinese companies are catching up technologically and competing on price, so profits have significantly decreased compared to the past," but added, "Considering new costs and risks, we are contemplating whether to maintain the status quo, relocate, or close factories." This person also requested anonymity for reporting, saying, "If rumors spread about business closure locally, existing business relationships could suddenly be damaged, and recently, Korean residents have been sensitive about this."

Binjiangdao Street, a representative bustling area in Tianjin, China. (Photo by Hyunjung Kim)

Due to the long-term decline in the Korean resident population, self-employed small business operators in Tianjin are also deeply concerned. The number of Korean residents has followed a trend similar to the size of local companies, gradually decreasing from about 70,000 in the early 2010s to less than 8,000 after the COVID-19 outbreak. Meanwhile, labor costs have steadily increased, and employment flexibility has decreased due to reforms in China's social security system. Mr. C, who runs a shared workspace company with 13 employees, said, "Before COVID-19, the daily wage for interior construction workers was about 300 yuan (approximately 56,000 KRW), but recently, even raising it to 500 yuan did not attract workers," adding, "The annual social insurance premium per employee was 1,500 yuan last year but has now risen to 1,700 yuan."

Due to worsening employment conditions after the COVID-19 outbreak, interest in labor laws has increased, and conflicts arising during resignation or dismissal processes sometimes lead to labor arbitration board filings between local employees and Korean employers. Mr. C said, "An employee who worked with us for two years quit last year and later demanded 15,000 yuan, citing the initial three-month probation period during which social insurance was not enrolled," adding, "It took over two months for government mediation, and I heard similar cases are piling up." Mr. D, who runs a Korean restaurant in Aocheng, said, "In the past, Meituan delivery workers were mostly outsiders from nearby small cities or rural areas, but in the last one or two years, most have become Tianjin locals," explaining, "Local residents lost their previous jobs, and delivery work often offers better income."

Tianjin City jumps into attracting investment and boosting consumption... Seeking opportunities

The economic vitality of Tianjin, as confirmed by figures, has weakened compared to the past. According to the GDP growth targets announced by 31 provincial and city governments in China, Tianjin set the lowest nationwide target at 4.0%. Compared to Hainan, which is rapidly growing as a duty-free zone with a target of 9.5%, Tianjin's figure is less than half. Most other regions set targets between 5.0% and 6.5%.

Looking at total trade volume, which can gauge the scale of the external economy, Tianjin also shows a sluggish trend compared to other regions. Last year, Tianjin's total trade volume was 844.9 billion yuan, ranking 10th among provinces and cities nationwide. Compared to the previous year, exports decreased by 1.9%, imports by 1.0%, resulting in an overall trade volume decline of 1.4%. Among the top 10 provinces and cities, Tianjin was the only one with a decrease in trade volume.

However, Tianjin city has recently announced large-scale measures for economic development and growth, showing its determination to leap into new fields. It plans to foster strategic emerging industries such as aerospace and smart manufacturing and has actively pursued investment attraction. The total investment target for the first quarter was set at 200 billion yuan, and various tax reduction measures were announced to encourage hosting international motor shows, promoting tourism, issuing consumption coupons worth 100 million yuan, and supporting overseas investors to build research and development (R&D) centers. Compared to other cities, highway tolls have been lowered, value-added tax exemptions for small businesses provided, and employment insurance rate reduction plans introduced.

Park Hong-hee, president of the Tianjin Korean Association, said, "Contrary to external concerns, the local government of Tianjin cooperates well, and the local public-private friendly relations are very good," explaining, "It is true that COVID-19 was difficult, but thanks to the city's proactive resolution of logistics and other issues, foreign companies actually received many benefits." He added, "We will acknowledge China's improved technological development level and respond well to make it beneficial for our companies."