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South Korea emerges as a prime US investor as China tensions escalate
The Tycoon Herald > Economy > South Korea emerges as a prime US investor as China tensions escalate
Economy

South Korea emerges as a prime US investor as China tensions escalate

Tycoon Herald
By Tycoon Herald 7 Min Read Published September 18, 2024
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South Korean corporations are investing document quantities of capital in to the US economic system, because the Biden administration’s efforts to carve out China from its provide chain and profitable subsidies for superior know-how producers spark a surge in undertaking commitments from Seoul.

US undertaking commitments from South Korean corporations totalled $21.5bn final 12 months, greater than some other nation and surpassing Taiwan, which was the biggest investor in 2022, in response to knowledge from the UN Convention on Commerce and Improvement analysed by the Monetary Instances. 

Final 12 months marked the primary time for at the very least a decade that South Korea has secured the highest spot for undertaking commitments within the US, a milestone that arrived as China’s place has fallen. Beijing was the highest investor within the US in 2014 however ranked eighth final 12 months after investments had fallen by a 3rd, in response to the UN knowledge, which tracks greenfield initiatives — commitments to construct services and jobs — and doesn’t embody acquisitions.

Whereas final 12 months’s commitments from South Korea had been 11 per cent decrease than the earlier 12 months, the information totalled 90 initiatives from South Korean corporations in 2023, the very best on document and up 50 per cent 12 months over 12 months. 

“The US doesn’t want to be sourced from China any more. This is giving Korean companies an opportunity to become US suppliers,” Chihwan Kim, chief government of Samkee, a Korean auto provider, instructed the FT. Final 12 months, Samkee invested $128mn to open its first US manufacturing unit in Tuskegee, Alabama, to construct car elements.

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South Korea emerges as a prime US investor as China tensions escalate

The surge in South Korean funding follows the Biden administration’s passage of the Chips and Science Act and the Inflation Discount Act in 2022, providing lots of of billions in tax credit, loans and subsidies to jump-start US manufacturing of semiconductors and clear applied sciences, together with photo voltaic panels and electrical automobiles, and cut back reliance on China, the dominant producer.

Greater than a 3rd of Korean undertaking bulletins within the US tracked by fDi Markets final 12 months had been within the automotive or electronics sectors. The IRA gives a $7,500 client tax credit score for electrical automobiles that requires meeting in North America.

Tensions between Washington and Beijing have additionally put strain on South Korean corporations to restrict their operations in China to pursue US expansions. The Chips Act, for instance, outlines “national security guardrails” for its funding, stopping recipients from increasing manufacturing capability and limiting know-how licensing efforts in China and different “foreign entities of concern”.

Greater than half of South Korean outbound funding flowed to the US final 12 months, up from 18 per cent in 2019. China, in the meantime, acquired lower than 1 per cent of South Korean funding final 12 months, down from 11 per cent in 2019, in response to Unctad.

Among the many largest bulletins final 12 months embody a $4.3bn funding from Hyundai to fabricate battery cells with LG Vitality Answer to produce its electrical car manufacturing unit in Georgia, the biggest undertaking within the state’s historical past, and an identical $3.5bn funding from Samsung SDI with GM in St Joseph County, Indiana, in response to fDi Markets, a subsidiary of the Monetary Instances.

“It’s been an intentional opportunity,” stated Invoice Schalliol, director of financial improvement in St Joseph County. Indiana officers have made 4 journeys to South Korea previously 5 years to recruit traders and the state ranks second for funding from Seoul.

The state is even poised for a demographic shift from its South Korean initiatives. Ninety minutes away from St Joseph County is one other Samsung SDI manufacturing unit in Kokomo, the place the town is anticipating greater than a thousand Korean expats and 6 new Korean eating places.

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Powerful macroeconomic situations, falling import costs and slowing demand for electrical automobiles have additionally delayed some investments from Korean producers and sparked requires higher US commerce protections. In July, LG Vitality Answer paused its $2.3bn battery storage manufacturing unit in Arizona, citing “market conditions”. Samkee is delaying including its electrical car strains by one to 2 years as a consequence of slower than anticipated adoption. 

“Manufacturers like Qcells are losing billions of dollars a month. Investments across the sector are at critical risk of failure,” stated Hal Connolly, head of public coverage and authorities relations at Qcells, a Korean photo voltaic elements producer in Georgia, at a Division of Commerce and US Worldwide Commerce Fee listening to in Might. 

“Without trade relief, the situation will only worsen,” Connolly stated. The corporate has filed a petition with a number of different US photo voltaic producers for extra tariffs on Chinese language photo voltaic corporations for alleged dumping in south-east Asia.

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