South Koreans Quit China as Yuan’s Gain Raises Cost of Living

By Kim Kyoungwha

Jan. 7 (Bloomberg) -- Kim So Hyun came to China to study medicine in 2004. Now, she may join the tens of thousands of South Koreans who went home last year as the yuan strengthened against the won, raising the cost of living.

“I want to stay but may have to return,” said Kim, 27, who attends Beijing Chinese-Medicine College. “The won’s drop greatly increased the financial burden on my parents, who wire money for school fees and rents.”

One in five of an estimated 700,000 South Koreans living in China at the start of 2007 have left, according to the consulate in Beijing. The won slid 31 percent against the yuan last year, making college fees and living costs more expensive for those paid in the Korean currency. Companies like Seoul-based LG Electronics Co. have cut benefits for expatriates and smaller exporters have closed Chinese factories and brought workers home.

China overtook the U.S. as the biggest export market for South Korea in 2003, prompting companies to move plants to China. Now, the repatriation of workers is hollowing out South Korean enclaves such as Wangjing, a 60,000-strong expat community in northeast Beijing, famous for its Korean restaurants and shops.

“This is the worst year during my five-year career in home brokering,” said Jin Yong Shan, a manager with real estate agency Jiajia Shiji Fangdi Chan Co. in Wangjing. “There’s an exodus of Koreans out of China and there are so many empty houses now.”

LG Electronics Co. is reducing subsidy on rents for employees in China by 20 to 30 percent, according to a Beijing- based company official who declined to be identified.

Exporters

“The yuan’s strength is taking a direct toll on smaller companies in China, especially those who export to Europe,” said Hwang Jae Won, deputy head of Korea Business Centre in Qingdao where about 5,000 Korean companies operate. “Some are pulling out of China to move to cheaper Indonesia or Vietnam.”

MiSung Polytech Co., a maker of mobile phone parts for LG Electronics, Motorola Inc. and Nokia Oyj, will cut 35 percent of its 1,700 workers in China this year, said Kim Sung Dae, a manager of the Qingdao-based plant. About 300 businesses failed in Qingdao last year, he said.

C-Mart, a chain of Korean supermarkets in downtown Beijing, stopped operating on Dec. 18, according to the Beijing Times.

The Korean won, Asia’s worst-performing currency last year, slumped as low as 222.94 against the yuan on Nov. 21 and traded at 189.09 today, compared with 129.50 a year ago, according to a data compiled by Bloomberg News.

Last month, China and South Korea swapped $28 billion of currency as part of their economic cooperation.

Jin of Jiajia Shiji in Beijing said he has made only one or two transactions a month compared with 20 a year ago. A three- bedroom apartment that previously rented for 20,000 yuan a month is unlikely to fetch 13,000 yuan now, he said.

Home Sales

Cao Hong, a real estate agent at Shanghai Centaline Property Consultants Ltd., said some Koreans are taking advantage of the won’s fall to sell homes and repatriate the money.

“Most of the foreigner-owned apartments sold in Lianyang neighborhood are from Koreans,” said Cao. “Koreans are selling housing at below market price because they need cash.” Lianyang is a middle-class community in east Shanghai.

Chang Sun Young, a 48-year-old housewife and mother of two kids, is preparing for a more frugal future in Beijing.

“I don’t play golf that often and may stop going out to the course because it’s not as cheap as before,” Chang said. “I buy stuff on the Internet and get it delivered from Korea because I get a better price and quality.” She relies on money sent by her husband in Seoul.

Tightening Belt

The won’s decline and falling global consumption is hurting smaller companies that moved to China in the past few years when labor costs and the yuan were lower.

“There is a growing number of smaller exporters from Korea, Hong Kong and Taiwan that are shutting down,” said Hwang Kyu Gwang, head of Korea International Trade Association’s Beijing branch. “The yuan’s strength, regulations on processed trade and labor costs that rise 15 percent annually are culprits.”

Some 20,000 companies from South Korea operate in Chinese cities such as Tianjin, Shenyang, Qingdao and Dandong, he said. China’s export orders and output shrank in November by the most since records began.

The Korean currency’s slump has also deterred many Chinese from heading to South Korea to find jobs with Korean companies because the salaries have dropped in yuan terms.

Not Alone

“I lost the reason for going to Korea,” said Kim Hye Ja, 52, a Chinese of Korean descent who took a test last summer in Beijing to qualify for a job in South Korea. “I’m not alone. Many friends of mine changed their minds to stay at home and those working in Seoul plan to return.”

Yu Hui Fen, 28, who teaches Chinese at a language institute in Wudakou, Beijing where Koreans are the largest foreign student community, said her income halved after a lack of students led to cancellation of her classes.

Still, some Korean students are hanging on, hoping that a Chinese education will offer better prospects in the long term.

“I persuaded my parents to let me stay here to complete my studies,” said Kim Dong Woo, 19, during a break between classes at the Wudakou institute. “I think China holds a better future for me.”

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net;