Korea's investment in China falling behind Japan, may lose future market share: KITA report

SEOUL, April 13 (Yonhap) -- South Korean companies' investment in China is lagging further behind that of Japanese firms, and their areas of investment raise concerns that they will be edged out by their Japanese rivals in the consumer market, a trade report said Sunday.

A report by the Beijing office of the Korea International Trade Association (KITA) showed Japanese companies invested US$52.9 billion in China over the 10-year period of 2004-2013, about 1.5 times more than the $36.15 billion by their South Korean counterparts.

"South Korea's proportion in China's foreign direct investment dropped to 2.6 percent last year from 10.3 percent in 2004," a KITA official said, without giving his name.

Japan began to overtake South Korea in 2005. In the year prior, South Korea had outdone its neighbor in Chinese investment by $800 million.

For three years from 2011, the amount of investment by Japan increased notably, the KITA report showed. Japan put in a total of $20.74 billion compared to $8.54 billion by South Korea.

The areas of investment also differed widely, the report showed, a factor officials said may sideline South Korea further in competition with Japan.

South Korean companies tended to invest in the manufacturing sector while Japan chose the distribution and service segments. Japan's investment in the latter two accounted for 26 percent of the total, comparable to 10.8 percent for South Korea.

The difference is that Japan is focused more in the consumption market that is likely to see explosive future growth in China, and should the gap widen, South Korea may lose its leading consumer market share, the KITA official said.

"We need to think about the fast-growing local consumption market in China and reassess our investment strategy," he said.

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