Thou Shalt Not Fear China

Southeast Asia should not fear China's low-cost labor and its attraction to foreign investors, so said a 2003 China Economic Quarterly article titled How Korean Firms Found a Gold Mine on the Mainland.

While competitive pressure from China had undoubtedly hurt low-end, labor-intensive manufacturing in many countries, this pressure had been described as "not necessarily negative on balance."

As the article pointed out, "what rarely gets reported are the benefits that neighboring countries can extract from a fast-growing China."

Using South Korea as an example, the article noted that five years ago, the country's economy was in disarray, given the Asian Financial Crisis. But recovery came far faster than anyone had anticipated, thanks in part to China.

China gave Korea's struggling companies, big and small, two things: a source of cheap manufacturing labor, and a ready-made export market.

Chaebols - Korea's giant industrial conglomerates - also realized that their future lied with China. Their first tack, in the mid-1990s, was to sell Chinese consumers second-rate goods at low prices. That strategy failed, since copycat Chinese companies could always win on price.

So in the late 1990s, Samsung, LG and other companies switched their focus to pricey, stylish, and hard-to-copy goods (pictured). Such a strategy was a success, partly because of the companies' success at marketing, and partly because of timing - which coincided with the rapid increase in the numbers of wealthier and middle-class Chinese.

The article added that as China's manufacturing economy booms, so will its appetite for Korean goods. Right now, China's northeast is dotted with tiny Korean food-processing and cold-storage firms that export products back to Korean supermarkets.

As the article concluded: "South Korea's situation is unique, because of its proximity to China and its specialization in industrial supplies that China desperately needs. But then, every country's situation is unique. The key is to make the best of what you have rather than complain about what you do not. And in this, Korea has a lot to teach the rest of Asia."