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A Regional Analysis of Major Chinese Industries and its Implication

Author Cho chul et al. Date 2019.12.18 Page

China’s manufacturing production surpassed the United States in 2010 and emerged as the world’s No. 1 manufacturing production powerhouse, and has continued to show faster growth, widening the gap. However, the growth rate is showing a slightly different pattern by industry. Semiconductor production in the early stages of industrial development is increasing very rapidly, and the general machinery industry in the development stage is also showing a relatively rapid increase in production. On the other hand, the textile industry is showing an annual average increase of 4.3%, which is significantly less than the overall production growth rate of the manufacturing industry.

Although China’s industries are concentrated in the eastern coastal regions such as Guangdong, Jiangsu, Shandong, and Zhejiang, where the economy is large, but there also are many industries that are concentrated in the Midwest or Northeast regions, depending on the industry. Because the general machinery industry has so many items, it is not highly concentrated in a specific area. But the textile industry is an industry distributed in various regions, but the concentration of five provinces including Jiangsu, Shandong, Zhejiang, Guangdong and Fujian is nearly 70%. The semiconductor industry also is one of the industries with relatively high concentration of production. Although they are interested in fostering the semiconductor industry in various regions, 84% of semiconductor production is concentrated in four provinces including Jiangsu, Guangdong, Gansu and Shanghai. In major industries, trade transactions between Korea and China are somewhat different from those of China as a whole. This seems to be related to the region where Korean companies make a lot of local investment. In terms of import and export of general machinery, Guangdong was the largest in China, but Jiangsu was the largest in Korea. In the textile industry, the No. 1 export region to Korea is Zhejiang Province, which is the same as China as a whole, but the import region is Guangdong. In particular, Shandong Province, where a lot of investment by Korean companies was made, ranks second in both China’s exports and imports to Korea. As for semiconductors, it is an important trading partner for Jiangsu, where Hynix’s plant is located, and Shaanxi, where the Samsung plant is located. Of course, Guangdong, an IT production base, also occupies an important position as an import region for Korean semiconductors.

For Korea’s investment in China, Jiangsu has become an important partner for general machinery, semiconductors, and textiles. Although Shanghai is Korea’s No. 1 investment area for textiles, Jiangsu is in second place. Also, for general machinery, Shanghai is the second largest investment area in Korea, and Shandong is the third largest investment area for both general machinery and textiles due to its geographical proximity.

China is pursuing strong structural advancement policies for each region, and it is time for the appropriate response strategies of Korean industries and companies to be required. In general machinery, Korea should reinforce its advantages such as technology, design, smooth after-sales service, and eco-friendliness, which still dominates, and it is important to lead the launch of reliable products. In the textile industry, it is necessary to pursue a strategy for securing a textile material market in response to a new clothing production base, and in response to eastern regions such as Jiangsu and Zhejiang, the development of high-functional and highly sensitive textile materials is required. In the semiconductor industry, memory semiconductors have a competitive edge in Korea compared to China, so it is important to maintain the competitive edge of Korean companies through a technology super-gap strategy. In addition, it should focus on strengthening the competitiveness of the system semiconductor field as a next-generation growth engine.

China is still the most important market for us, and considering China’s growth, it is highly likely that its importance will continue to grow in the future. Accordingly, new strategies to advance into China should be established in various forms, including regional differentiation strategies. Although competition in the Korean industry with China is intensifying, there are areas in which mutual cooperation can also exist. There will be many areas to cooperate with Korea not only at the central government level but also at the local government level of China.