South Korean companies scaled back their investments in China by more than 40 percent this year due to foggy business prospects amid Beijing`s growing economic retaliation against Seoul’s deployment of U.S missile defense battery.

According to data from China and the Bank of Korea on Sunday, Korea’s foreign direct investment (FDI) in China marked a 43.7 percent plunge to $1.75 billion in the first seven months of this year. U.S. direct investment in China also declined by 37.5 percent while Singapore and Japan saw their investment down by 18.6 percent and 3.7 percent, respectively in the same period. In contrast, Taiwan and Hong Kong increased their direct investment by 33.6 percent and 1.3 percent, respectively.

“Diplomatic tension between Seoul and Beijing over the THAAD system deployment and China’s policy to select and focus investments from overseas on advanced manufacturing and the service industry are behind the plunge,” said the central bank in its report.

Due to China`s retaliation against the deployment of a U.S.-led antimissile system in South Korea, Korean companies’ investment has nosedived. Kia car sales in China reached 429,000 units in the first half of this year, down 47 percent from a year ago. Samsung’s market share fell to the ninth spot in smartphone sales. In the retail sector, E-Mart declared its exit from China after 20 years of operations there and Lotte Mart is poised to follow suit.

The Chinese government has a lukewarm attitude toward business setup applications by Korean companies in China, and many Korean firms are now seeking assistance from quasi government organizations like KOTRA for their market entry in China,” said an official familiar to the situation in China.

By Na Hyun-joon

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