South Korea presses home China advantage versus Japan

By Simon Rabinovitch - Analysis

BEIJING (Reuters) - Through a mixture of good fortune and well-executed strategy, South Korea has been better placed than Japan to catch a lift from China's heady growth and leave the global financial crisis in its rear-view mirror.

But the advantage of greater Chinese exposure will become more dubious in coming years as the Asian giant cranks up its own value-added production in electronics, shipbuilding and automobiles, turning from South Korea's customer to competitor.

Another trend will work in South Korea's favor, however. China's steady creep toward a more consumption-driven growth model will benefit those companies and countries that can produce attractive and reliable but relatively inexpensive goods.

"The Koreans are very, very competitive in that," said Ajay Kapur, head of global strategy at Mirae Asset Securities in Hong Kong. "Japan is at a much higher part of the value chain. It's just much more expensive in terms of price point."

Consumer goods account for just 4 percent of China's total imports at present, leaving vast room for growth.

No one is saying that Japan will miss out on the longed-for explosion of Chinese consumption. But in the race for customers, Korean firms already have a little more spring in their step.

Samsung Electronics (005930.KS) carved out the biggest share of revenue in China's television market at 10.9 percent in the year through October 2008, beating all domestic and foreign producers, according to data from Chinese TV maker Skyworth (0751.HK). Sony Corp's (6758.T) share was 10.2 percent.

In China's automobile market, Hyundai Motor's (005380.KS) local venture has taken fifth place so far this year with sales of 460,590 units. Among its Japanese rivals, Nissan Motor (7201.T) is closest in seventh place with 422,460 sales.