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S Korean firms' views on China's cool down mixed

SEOUL - The majority of South Korean firms investing in China view the Chinese "cool-down" economic policy negatively in the short term but positively in the long term, according to a survey released today by a trade promotion agency.

The survey, conducted by Korea Trade-Investment Promotion Agency (KOTRA), received responses from 180 South Korean firms investing in China.

Of these, 69.9 percent said they have been impacted negatively since China began implementing its tighter monetary policy.

China has gradually tightened its monetary stance in an effort to cool down an overheated economy, prompting concerns over China's economic outlook.

According to the survey, 26.8 percent of the companies said financing problems were their biggest difficulties, while 26.8 percent named a decrease in sales in China as their main difficulty. Securing resources, opening letters of credit and collecting revenues followed.

Despite these immediate effects, 47.8 percent of those queried said the tight monetary policy would be good in the long term and 21.1 percent even said it was positive in the short term.

Almost half of the respondents said the policy would not affect the future investment climate, and 23.3 percent said they would increase investment as scheduled.

Only 15.6 percent of the companies said they had come up with countermeasures, such as using Korean financial institutions for financing, discounting sales prices and diversifying their business areas.

According to KOTRA, many firms were not formulating countermeasures because they lacked information.

"China's tight monetary policy could lead to a temporary decrease in sales there, but also secure a position from which to raise the Chinese economy with balance and stability," said Hwang Jae-won, head of KOTRA's China task force.

The survey was conducted between May 10 and May 20, and 76.7 percent of the respondents were manufacturers.

Seventy percent of the companies had invested up to US$10 million.

(Asia Pulse/Yonhap)

Jun 4, 2004

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