A report released by the Korea Economic Research Institute shows a shift of focus of Korean companies' overseas investment, with more and more firms investing in Vietnam.
Our Kim Hyesung has the details.
Overseas direct investment by Korean manufacturers is moving from China to Vietnam due to corporate tax benefits and deregulation policies.
According to the Korea Economic Research Institute, China accounted for about 28 percent of Korean manufacturing companies' overseas investment in 2017, down 17 percent from the 2000s.
In contrast, overseas investment into Vietnam increased by 12 percent over the same period, accounting for near 18 percent of Korean manufacturing firms' total investment last year.
Many small and mid-sized manufacturers in particular have moved their investment to Vietnam.
Their investment in Vietnam surpassed their investment in China for the first time in 2014, and last year reached 720 million U.S. dollars, or 1-point-seven times the amount of investment in China.
Large manufacturers' investment in China has been declining, but is still about two-point-five times higher that invested into Vietnam.
The report attributed the shift in investment to changes in the business environment and government policies.
Since 2008, China has raised foreign companies' corporate tax rates, getting rid of its lowest 15 percent rate, and instead setting a blanket rate of 25 percent, with the exception of some high tech industries.
It has also restricted investment in sectors like low-value added goods that cause pollution.
Vietnam, on the other hand, has exempted foreign-invested high-tech companies from corporate taxes for four years, and eased regulations on foreign investors' acquisition of real estate.
In addition, China's labor costs have continued to increase, making Vietnam's minimum wage about half that of China's.
Kim Hyesung, Arirang News.