Why Chinese manufacturers move to Korea? Gwangyang Bay Area emerges as hot spot for relocation
- Not only trade war with the U.S., strategic initiatives let manufacturers select Gwangyang
- Chinese companies can utilize Korea's global FTA networks and ‘Made in Korea’ effect
Rethinking global expansion strategy, some Chinese manufacturing companies cleverly opt for Korea as new export base. Especially, Gwangyang bay area located on Korea's southern coast is emerging as attractive destination for Chinese manufacturers to relocate their factories.
One of China's aluminum giant company broke ground in December, 2019 to construct manufacturing plant in South Korea's Gwangyang bay area free economic zone. Henan Mingtai Aluminum Industrial Co, China’s second-largest aluminum rolling mill, would invest about $85 million to build the plant. About 90% of production from Korea factory will be exported to oversea market. The company can use Korea plant as a detour for exports to the U.S. that imposes high tariffs on aluminum products made in China.
It is not the first case of Chinese manufacturers' relocation to Gwangyang bay area. In 2016, China Yeeper Dairy Group established Korea plant, called as HAM, in Gwangyang bay area free economic zone. HAM produces premium organic infant formulas, and then they export the products to China and EU, possibly Southeast Asian countries. Recently, the company decided additional $15 million investment to expand the capacity of Korea plant.
In addition, KINGTOPS, a Chinese hygiene products manufacturer, will build factory to produce sanitary pads, diapers, wet wipes and other similar products in Gwangyang bay area. The products will export to China, Taiwan, Hong Kong, Southeast Asia, and other countries.
The common reason why these Chinese companies select Gwangyang is its geographical advantage. As well as the proximity to China, the area is located on the world's major sea routes of Northeast Asia and the Pacific Ocean. As a logistic hub, Gwangyang port has 80 liner services per week shipping with about 110 other ports all over the world, while especially more than 40 vessels are sailing for China. More importantly, Gwangyang Bay Area Free Economic Zone rents land to foreign companies with favorable condition of 1.5CNY/㎡/month.
The foreign manufacturers in this area can leverage Korea’s global FTA networks. Korea has more than 50 FTA partners and try to expand economic territory globally every year. In some product categories, 'Made in Korea' label can be well accepted by consumers in both local and oversea markets. They see Gwangyang bay area as an ideal location for global expansion.
Gwangyang bay area has been well known for Korea's major industrial complex. POSCO’s Gwangyang Steel Mill boasts the world’s largest capacity to roll out crude steel, and the Yeosu Industrial Complex produces 56 percent of domestically produced petrochemicals. Recently, new industry supply chains are emerging in the area; for example, secondary battery, LNG trading and consumer products.
This article is contributed by independent experts, SB Yoon and Wang Wei in QYResearch