Why are Korean products no longer popular in China?

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made in south korea

Korean cars which made in south korea are no longer working, and cosmetics are also no longer working
I remember buying a Samsung camera and TV 10 years ago
Dancing with the United States, no wonder it doesn’t sell well in China. It’s really refreshing
Recently, the news of “South Korea’s trade deficit with China or its first in 31 years” has once again heated up economic and trade topics between the two countries. A report released by the Shanghai Representative Office of the South Korean Trade Association in March also sparked discussions on social media: after conducting a survey of 1000 people in the Chinese market, this report reached a conclusion that many Chinese consumers share – in recent years, the popularity of South Korean products in China has significantly declined, and few people are interested.
From cars to cosmetics, the shift from the “Korean wave” to the “cold wave” in the Chinese market has long attracted the attention of South Korean media. In July last year, the Korean Daily reported under the title ‘Abandoned by the Chinese Market,’ ‘Made in South Korea Becomes Memories’, describing the rapid growth of Chinese enterprises as’ squeezing South Korean enterprises out of the market’; In January of this year, the Korean Daily News directly attributed the decline in the share of Korean goods in China to “the patriotic sentiment of the Chinese people aroused by the United States”.
While Korean goods are cooling down in China, it seems that Japanese made goods are no longer popular. With more and more local home appliances being favored, domestic cars have taken over the sales chart. The news of Chinese e-commerce, automotive, and home appliance brands’ landing in Japan and South Korea has repeatedly spread, making many netizens exclaim that “this is not the same as before”.
According to Li Shangxun, the Chief Representative of the Beijing Representative Office of the Korea Institute of Foreign Economic Policy, there are many factors that affect the performance of Korean goods in the Chinese market, but the rise of Chinese brands and the upgrading of product quality can be said to be the most fundamental reasons. Shi Xianjin, an assistant researcher at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, specifically mentioned that whether South Korean goods can break out of their lows in China in the future depends not only on the political water temperature and economic trends of both countries, but also on whether South Korean brands can reshape their competitiveness in China.
Chen Zilei, director of the Japan Economic Center at Shanghai University of International Business and Economics, reminded that one should not be blindly optimistic about the sales of Japanese and Korean brands in China, but also take a longer-term perspective. Overall, Japan and South Korea are still leading the world in some key manufacturing technology and process fields. Chinese enterprises can leverage their advantages in new formats and consumption patterns, and their cooperation prospects are very broad.
Korean goods are cold, and the rise of Chinese brands is fundamental
On March 5th, a report by Yonhap News Agency titled “Korean goods received cold treatment in China after the epidemic” spread on social media. The survey conducted by the Shanghai Representative Office of the Korean Trade Association has several data points worth noting: compared to 2020 in the early stages of the epidemic, the proportion of positive reviews from Chinese consumers for Korean product images has decreased by 5 percentage points to 54.5%, while the proportion of negative reviews has surged by 6.6 percentage points to 10%; Poor product evaluation (35.9%), national image (34.6%), and insufficient competitiveness (33.6%) were the main reasons why survey respondents did not buy Korean goods.
In fact, even before the outbreak of the epidemic, the market share of Korean goods in China had been declining for several years.
On December 27th of last year, the Korean government’s non-profit trade promotion agency, the Korean Trade and Investment Revitalization Association (KOTRA), released a report showing that although the trade scale between China and South Korea continued to increase and the overall transaction volume increased between 2012 and 2021, the performance of Korean goods in the Chinese market was all signs of weakness. In 2012, the share of Korean goods in the Chinese import market was 9.2%, reaching a peak of 10.9% in 2015, and gradually decreasing thereafter, By 2018 and 2019, it had dropped to 9.7% and 8.4% respectively. In 2021, it fell to the lowest level of 8.0% in nearly 10 years.
The share of Korean products in the Chinese import market (illustrated by Korea Daily)
In February, South Korea’s “Asia Daily” cited data from the automotive industry, stating that Hyundai Motor sold 1.8 million vehicles in China in 2016, with a stable market share of around 10%. But since then, sales have continued to decline, with a “halving” to 785000 units in 2017, and only 352000 and 254000 units in 2021 and 2022, respectively, with market share shrinking to 1%.
In the cosmetics industry, the Nikkei Asia Review reported in March last year that Korean cosmetics brand Amory Pacific is reducing its important mid range brand Yueshi Fengyin’s store network in China, while another Korean cosmetics company, LG Life Health, is attempting to break through the US market. According to data from South Korean Yuanda Securities, in the third quarter of 2021, the sales of beauty products by these two companies in China decreased by 8% and 2% respectively.
At the 2016 Shanghai Beauty Expo, models showcased Korean brand cosmetics (Visual China)
Looking back on the “Korean goods craze”, Shi Xianjin said that at that time, Korean culture was popular, and some local satellite TV stations actively introduced Korean film and television dramas, music, variety show, and stars. Taking advantage of this trend, Korean goods with high quality, innovation, and fashion as selling points attracted the attention and trust of a large number of Chinese consumers. On the contrary, at that time, Chinese local brands were still in the stage of development and growth, making it difficult to compete with Korean products in terms of price and quality.
But now, the situation has changed. “Shi Xianjin pointed out that there are many factors that affect the performance of Korean products in the Chinese market, including political relations, consumer preferences, domestic competition, economic environment, and cultural factors.
It is worth noting that South Korean media have analyzed the cold reception of Korean goods in China, and many have attributed it to the argument of confrontation between China and the United States. For example, on January 5th this year, the South Korean Daily reported that “the performance of ‘Made in Korea’ in the Chinese market is increasingly declining due to the United States stirring up patriotic sentiment among Chinese people.” This report cites relevant reports from the South Korean government’s trade promotion agency, blaming the United States for the significant decline in the market share of South Korean goods in China in recent years.
Shi Xianjin believes that, from one perspective, the rise of domestic Chinese brands does indeed put some competitive pressure on imported brands, as some products made in China are no inferior to international brands in terms of quality and price, expanding the range of choices for domestic consumers. On the other hand, the trade conflict between China and the United States will indeed affect the purchasing sentiment of Chinese consumers towards imported products from abroad, and South Korea, as an ally of the United States, will naturally be affected. Another point that cannot be ignored is that the decline in popularity of Korean products in China may also be related to factors such as the cooling of Korean culture, the quality, price, and marketing of Korean products themselves. If Korean products cannot meet the needs and expectations of Chinese consumers, it will be difficult to maintain competitiveness in the Chinese market.
The rise of Chinese brands and the intensification of conflicts between China and the United States are the two most important reasons, “Li Shangxun said. The strengthening of Chinese brand power is forming a consumption trend of replacing Korean goods, which should be said to be the most fundamental reason. In addition, there are also some reasons for the emergence of new consumption trends such as new energy vehicles.
But at the same time, Li Shangxun believes that the factors mentioned by South Korean media regarding the conflict between China and the United States do have an impact, but will only exist in the short term.
In the Chinese market, the popularity of Tesla and Apple phones in the United States is still quite high. After all, when people make reasonable purchases, they consider the price and quality of the product, which is also known as cost-effectiveness. Some people also purchase products from a specific brand to meet their consumption needs. “Li Shangxun said,” Based on long-term trends, the brand and cost-effectiveness of a company are the most crucial factors
Sud Incident, Mobile Phone Spontaneous Combustion… Korean Goods Faced with Trust Crisis
According to the data released by the Korean Trade and Investment Revitalization Commune, 2015 can be seen as the peak market share of Korean goods in China in recent years.
Li Tianguo, an associate researcher at the Asia Pacific and Global Strategy Research Institute of the Chinese Academy of Social Sciences, believes that the phenomenon of Korean goods being cold is actually due to changes in the comparative advantages of China and South Korea, and cannot be attributed to a specific year. The trade between China and South Korea has always been characterized by intermediate goods, and with the improvement of localization process, a large number of intermediate goods imported from South Korea have been replaced by domestic intermediate goods.
Previously, Lee Jae soo, the leader of the Asia Pacific Cooperation Group of the National Economic Association of South Korea, stated that with the rapid development of Chinese technology, South Korea’s exports of intermediate products to China are decreasing, while the import quantity of Chinese manufactured goods is increasing. It is now difficult to earn huge profits in trade with China.
Li Shangxun noticed that in 2005, the share of Korean goods in the Chinese import market reached a peak of 11.6%, followed by a slight decline; By 2015, it had risen again to 10.9%, but since then it has been declining year by year, so 2015 is a very obvious turning point.
He listed three factors for this phenomenon. The first is the improvement of China’s science, technology and innovation capability: China has optimized its industrial and economic structure, implemented an innovation driven development strategy, promoted the supply side structural reform, Internet plus and other strategic emerging industries, and improved China’s science, technology and innovation capability. This has led to the substitution of Korean products in the fields of steel, machinery, electronics, and other industries by domestically produced Chinese products.
On the other hand, this phenomenon is related to the increasingly fierce competition in the Chinese import market. Li Shangxun analyzed that China’s economy has maintained a long period of rapid development, with rapid growth in import scale, and many countries are striving to increase exports to China. According to the overall trend, before 2015, the share of Korean goods gradually replaced that of Japan, but after 2015, the trend of South Korea being replaced by ASEAN became increasingly evident.
In addition, semiconductors are the main product exported by South Korea to China, accounting for about 30% of its exports to China. However, the rapid increase in semiconductor exports from Taiwan to the mainland has also had a certain impact on the decline in market share of Korean products.
On one hand, there is the growth of Chinese brands, while on the other hand, South Korea is also facing a crisis of trust. “Shi Xianjin mentioned that shortly after 2015, when the South Korean government acted recklessly and caused the Sard crisis, China South Korea relations were severely impacted, and China’s domestic perception of South Korea generally deteriorated, leading to a significant reduction in the demand for physical goods and service products from South Korea among Chinese consumers. It was also during this period that, driven by China’s optimization of economic structure and policy dividends, Chinese enterprises with solid foundation gradually grew and strengthened, and their technology and quality were significantly improved, launching many new products. The development of e-commerce in China also promotes the marketing of domestic brands, giving high-quality domestic brands a foothold in the Chinese market.
Apart from the external environment, the marketing of Korean brands has not been able to keep up well with the changes in the Chinese market environment. “Shi Xianjin believes that on the one hand, it is a price factor. Some Korean brands are priced too high in the Chinese market, and most Chinese consumers are still sensitive to prices. High prices do not meet the purchasing habits and needs of Chinese consumers. On the other hand, some Korean brands have failed to put in effort in localization and differentiation. Many Korean brands lack differentiation in their positioning in the Chinese market, making it difficult to highlight their differences from other Chinese brands and attract consumers’ attention and trust.
Chinese consumers are no longer blindly pursuing imported goods, and their consumption preferences have returned to rationality. Especially, some quality issues of Korean products have raised public concerns and doubts, such as the frequent explosions and spontaneous combustion incidents of Samsung smartphones, which have also led to a decrease in Chinese consumers’ trust in Korean brands
Japanese and Korean products are no longer popular, but some areas still have advantages
Along with Korean products, there are also some Japanese brands that have failed in the Chinese market. Ten years ago, I felt like Japanese products came with high-end labels, but unconsciously, it’s hard to think of Japanese brands first when buying appliances or cars nowadays, “said a netizen on social media.
In 1979, Panasonic Electric signed an agreement with China, marking the beginning of the development of Japanese home appliance enterprises in China. With the continuous deepening of China’s reform and opening up, Japanese brands are blooming everywhere in China. According to historical data compiled by Guotai Junan Securities, from 1990 to 2000, the sales and share of Japanese brands reached historical peaks, with Panasonic occupying nearly 20% of the Chinese color TV market share.
At that time, China’s industrial capacity was unable to meet people’s increasingly high material needs, and most Chinese people became supporters of Japanese brand home appliances, “said Shi Xianjin. Entering the 21st century, under the market pressure brought by the growth of domestic brands, national sentiment, and price wars, many Japanese brands have begun to decline, dragging down their performance in the global market.
According to German data company Statista, the top five global home appliance manufacturers in 2020 were Haier, LG, Whirlpool, Midea, and BSH (Bosch and Siemens). In terms of television, sales of TCL, Hisense, Xiaomi, Skyworth, etc. are among the top; In terms of air conditioning, Gree, Midea, and Haier have long occupied the top three global markets.
There are also many Japanese car companies that have encountered the reality of “bone feeling”. According to the Japanese website “Toyo Economic Online”, the market share of Japanese cars in China’s passenger car market has significantly decreased from 23.1% in 2020 to 17.8% in 2022, while the market share of Japanese brands in China’s new energy vehicles in 2022 was only 1.7%.
Market competition is cruel. With the rise of Chinese domestic brands and the emergence of new consumer trends, it is inevitable that Japanese products will be impacted in their past advantageous areas. As for the future, it depends on the external environment, market trends, and whether enterprises can seize opportunities
Shi Xianjin believes that for Japanese and Korean enterprises, their products and market strategies in trade with China are not the same, and they have their own advantageous areas and face different situations.
From the perspective of product type and technical strength, Japan and South Korea have overlap and competition in certain fields, and each has its own characteristics. South Korea is renowned for its technological strength in consumer electronics, semiconductors, automobiles, and other fields; Japan’s export products involve multiple fields, such as automobiles, electronic products, machinery, chemicals, etc., especially in some high-end technology fields, such as robots, semiconductors, solar cells, etc. Japan’s technological strength is in a leading position and still has a strong competitive advantage.
Faced with the dilemma of declining sales of Korean companies in China, the Korean Daily News published an article on July 25 last year stating that the Korean industry has even developed an atmosphere that “the era of Korean companies making money in the Chinese market will never come back.
Is this really the case?
Although the sales of Japanese and Korean products in China have declined, compared to domestic products, Japanese and Korean companies do still have advantages in some fields. “Shi Xianjin said,” Firstly, there is a comparative advantage in technology. Some companies in Japan and South Korea still have leading advantages in technological innovation in electronic products, semiconductors, and other fields, and they also do better than Chinese companies in precision machining and high-quality surface treatment.
Chen Zilei mentioned that in the past, Chinese consumers were optimistic about Japanese and Korean products, especially overseas consumption that drove domestic consumption, but now there is gradually a sense of fatigue. Products such as cars, rice cookers, and toilet covers are durable consumer goods with a longer cycle of repeated consumption. Other non durable consumer goods were still relatively popular at the time. In the domestic market, the quality of daily consumer goods in Japan and South Korea is still relatively good, but the price competitiveness is weaker, especially during the epidemic period, the domestic consumer demand in China has significantly decreased. The combination of several factors has led to a decline in sales of Japanese and Korean brands.
When Chen Zilei mentioned Japanese cars, he said that their competitiveness and market share have decreased mainly due to the explosion of China’s new energy vehicles, which have strong competitiveness in both domestic and export sales. With the development of new energy as an emerging industry, China’s achievements have caught the attention of the world, and the competitive advantage of Japanese enterprises is not obvious.
He stated that Japanese companies have made mistakes in China’s consumer demand and the transformation of the automotive industry. Although Japan has a significant competitive advantage in the research and sales of hydrogen energy vehicles, this advantage has not been translated into a competitive advantage in the Chinese market, including on-site production and sales in China, as it involves various factors such as hydrogen refueling station construction and after-sales service, and Japanese companies have not made significant breakthroughs in these areas.
As for whether the current market situation will evolve into a long-term trend, Chen Zilei admitted, “We need to look at this issue from a long-term perspective
We cannot be too optimistic about the decline in sales of some brands in Japan and South Korea too early. This is due to factors such as changes in consumer consumption patterns and the impact of income decline during the pandemic. Therefore, we need to take a longer time cycle to view this issue. “Chen Zilei said that changes in the Chinese market can also bring business opportunities to Japanese and South Korean enterprises, but it depends on whether they can view the Chinese market with a strategic and forward-looking perspective; Whether it can meet the needs of Chinese consumers in terms of research and development, manufacturing, process, and production; Can it align with China’s national development strategy. These are all key issues for the recovery of sales of Japanese and Korean products in China.
Chinese brand “landing” in Japan and South Korea, besides competition, we also need to see broad cooperation prospects
It is not just domestic consumers who feel the growth of Chinese brands. With Chinese enterprises continuously increasing investment and accumulating knowledge in basic research and core technology fields, Chinese manufacturing has long shaken off the labels of “cheap” and “low-end” and gradually become a “good idea” for overseas consumers.
At present, China has become the core trading country in the Korean online shopping market, and the demand for Korean consumers to purchase cost-effective electronic products from China through e-commerce has significantly increased. In December last year, China News Network reported that during major promotions such as “Double Eleven” and “Black Friday”, Koreans snapped up Chinese goods on China’s cross-border e-commerce platform AliExpress, even causing a “warehouse explosion” in customs logistics centers. In addition, new Chinese goods such as esports keyboards, fascia guns, coffee machines, and blind box trendy games were also popular in South Korea. According to the statistics of mobile data analysis platform App Annie, during the “Double Eleven” period in 2022, AliExpress became the most downloaded shopping app in South Korea, surpassing the most popular local e-commerce platform Coupang.
In recent years, more and more Chinese products have been favored by overseas consumers due to their high cost-effectiveness, “said Li Tianguo, South Korea is an important trading partner of China. In the past, China has been importing more Korean branded manufactured goods. However, now more and more Chinese goods are entering Korean households and being loved by Korean consumers. The trade deficit between China and South Korea is also significantly declining, which also represents the improvement of the international competitiveness of Chinese products
Li Shangxun expressed the same view. He stated that for a long time, Chinese companies have had their own price advantages in their products, occupying an important position in many countries around the world. But now, Chinese products not only have price advantages, but technology and quality are also rapidly improving.
From this perspective, it’s not surprising that the popularity of Chinese products in South Korea has increased. I expect more and more Korean consumers to choose Chinese products in the future, “he said.
Nowadays, Chinese brands are striving to seize the favorable opportunity of new consumer trends and expand into the Japanese market. At present, China BYD has occupied nearly 70% of the share of Japanese electric buses, and its electric passenger car ATTO 3 was launched and sold in Japan on January 31 this year. BYD also plans to open 100 stores nationwide in Japan by the end of 2025 to meet the relevant needs of the Japanese market.
In a report in Nihon Keizai Shimbun last September, it was mentioned that Chinese manufacturers’ sense of presence in the Japanese home appliance market was gradually increasing. For example, Hisense Group set up a research and development base in Japan and began to sell products of its own specifications. The report specifically pointed out that Chinese home appliances used to only focus on low prices in Japan, but now they are aimed at young people with relatively weak attention from Japanese manufacturers to manufacture products. This has opened up a gap in the monopolistic market, and their products have begun to be prominently displayed in Japanese mass selling stores.
“We can see that the sales of Chinese products in Japan are indeed growing, especially in the field of new energy vehicles.” But Chen Zilei also reminded that although BYD has established a bridgehead, this is only the first step in the long march, and there may be many problems in the future. For example, BYD faces strict targets set by the Japan Automobile Industry Association, and there is still some uncertainty as to whether BYD can meet environmental and safety technology indicators to successfully sell in Japan.
The prospects for cooperation between both sides are very broad. “Chen Zilei believes that overall, Japan and South Korea still lead the world in technology and craftsmanship in some key manufacturing industries, while Chinese enterprises can leverage their advantages in new consumption formats and seize business opportunities to enter Japan, bringing new consumption models to the region. While leveraging its advantages, it is also necessary to engage in supply chain cooperation with Japan and South Korea.
Looking ahead, Shi Xianjin said, “Currently, the three countries have strong market dependence on each other, and China also plays a central role in the Asian supply chain. The implementation of RCEP has also played a certain role in helping Chinese products open up the Japanese and Korean markets. With the significant improvement in the quality and technological content of Chinese export brands, preparations have been made for entering Japan and South Korea. In the future, the three countries should continue to maintain close cooperation on maintaining the stability, smoothness, and efficient operation of the Asian supply chain
Li Tianguo also emphasized that besides competition, Chinese and South Korean enterprises should see broad prospects for cooperation.
In the past thirty years, China and South Korea have fully utilized their comparative advantages, strengthened trade and industrial investment cooperation, and formed a close industrial division of labor relationship. However, with the enhancement of China’s economic strength and technological progress, the comparative advantages of the two countries have undergone significant changes, and the competitiveness of the two countries in some industrial fields has also increased, which poses certain challenges to industrial cooperation and trade between China and South Korea
Li Tianguo emphasized that China and South Korea need to adjust their investment and trade structures in a timely manner based on this new trend of change, explore new areas of cooperation in emerging industries such as artificial intelligence, new energy, biopharmaceuticals, intelligent logistics, and the Internet of Things, and explore new cooperation models. In addition, the two countries also need to strengthen strategic communication, eliminate external factors, enhance mutual understanding and trust, grasp the overall direction of bilateral relations, and jointly achieve regional economic prosperity and development.