7 out of 10 Domestic Manufacturers Affected by China's Low-Cost Push Aggression

KCCI Survey of 2,228 Manufacturing Companies
27.6% "Sales Impacted by Low-Cost Chinese Exports"
42.1% "Concerned About Future Damage"
Battery Companies Face 'Double Burden'

Due to China's low-price dumping offensive, 7 out of 10 Korean companies were found to have been affected in sales or orders, or to have a potential risk of damage in the future. Concerns are also rising that the low-price dumping offensive may prolong as the inventory of finished products in China is increasing again.

According to the Korea Chamber of Commerce and Industry on the 6th, a survey of 2,228 manufacturing companies nationwide showed that 27.6% of respondents said that low-priced exports from Chinese products have actually affected their sales and orders. Meanwhile, 42.1% of companies expressed concerns that although there has been no impact so far, there is a possibility of damage in the future.

The damage caused by China's low-price offensive was more severe in overseas export markets than in the domestic market. Among export companies, 37.6% responded that their performance was affected, significantly higher than the 24.7% of domestic companies who gave the same response. Also, the proportion of domestic companies (32.5%) who said they expect little or no damage in the future was higher than that of export companies (22.6%).

In particular, battery companies struggling with reduced demand for electric vehicles were facing double difficulties due to China's low-price offensive. By industry, the proportion of companies responding that their business performance has already been affected was highest in secondary batteries (61.5%), followed by textiles and apparel (46.4%), cosmetics (40.6%), steel and metals (35.2%), and electrical equipment (32.3%), all exceeding the overall industry average (27.6%).

On the other hand, industries such as automobiles (22.3%), medical precision (21.4%), pharmaceuticals and bio (18.2%), non-metallic minerals (16.5%), and food and beverages (10.7%) were found to be relatively less affected by the low-price offensive.

The damages experienced by domestic companies due to China's low-price offensive (multiple responses allowed) were mostly price declines (52.4%) and reduced transactions in the domestic market (46.2%). Other damages included decreased sales in overseas export markets (23.2%), reduced exports to the Chinese market (13.7%), and business downsizing or suspension due to poor performance (10.1%).

To respond to China's additional low-price and volume offensives, Korean companies cited strategies (multiple responses allowed) such as quality improvement through the development of high value-added products (46.9%), market base expansion through product diversification (32.4%), pioneering and targeting new export markets (25.1%), and cost reduction including labor costs (21.0%).

According to China's National Bureau of Statistics, the inventory rate of finished products in China sharply increased from 6.94% in October 2020 to 20.11% in April 2022 due to consumption and real estate market downturns during the COVID-19 period. Subsequently, as Chinese companies exported excess inventory overseas at low prices, the inventory rate dropped to 1.68% in November 2023, but it rose again to 4.67% as of June due to China's persistent economic slowdown.

Although Korean companies are preparing for the low-price offensive with technological capabilities and quality, survey results also showed that China's technological catch-up is accelerating, and it may catch up in technology within a few years.

Over the past five years, only 26.2% of companies responded that they have maintained technological and quality competitiveness superiority over Chinese competitors. Meanwhile, 47.3% said they still have an advantage but the technology gap has narrowed, and 22.5% said Chinese competitors have caught up to a similar level.

Among companies that responded they currently have technological superiority or are at a similar level compared to Chinese companies, 73.3% expected Chinese companies to surpass them in technology within five years (39.5% within 4-5 years, 28.7% within 2-3 years, and 5.1% within 1 year).

Regarding support policies needed to respond to the prolonged Chinese low-price offensive, the most cited was domestic industry protection measures (37.4%). Other responses included expanding research and development (R&D) support (25.1%), support for pioneering new markets (15.9%), expanding trade finance support (12.5%), and support for utilizing free trade agreements (FTA) (6.3%).

Kang Seok-gu, head of the Korea Chamber of Commerce and Industry's survey division, said, "The number of anti-dumping petitions filed by our companies against imported goods is usually 5 to 8 cases annually, but this year, 6 cases were filed in the first half alone," adding, "As global trade disputes continue to expand, the government's response stance must also change."