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China still a draw for S. Korean firms
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China remains attractive to most South Korean investors, in particular the big ones, Chinese officials said amid reports that many South Korean firms are winding up their operations in China without following the correct procedures.

"A few small South Korean enterprises closed down in Shandong province because of cost increases caused by renminbi appreciation as well as changes in the taxation policy. It's quite normal," said Liu Xiaojiang, deputy director of the Shandong department of foreign trade and economic cooperation.

The province is a major investment destination of South Korean enterprises in China.

"At the same time, however, the number of projects in which South Korean multinationals have invested keeps increasing in our province. Five such projects are under way in Shandong," he said, adding the province remains one of the best destinations in China for South Korean and Japanese companies.

Earlier reports said beginning from the second half of last year, more and more South Korean investors have been closing down operations in China without following the legal closing procedures as the Chinese authorities strengthen labor and environmental laws and also as labor and material costs increase.

South Korean businesspeople are reportedly leaving without properly disposing of the facilities and keeping employees in the dark.

Between 2003 and 2007, 206 South Korean companies folded in China without following the correct procedures, all in Shandong province, South Korean media said. Only 55 companies reportedly followed the proper procedures.

Hong Ji-in, head of the South Korean commerce ministry's trade cooperation bureau, was quoted by the local Yonhap news agency as saying the government is weighing possible steps to penalize businesses that leave China without following the correct procedures, such as allowing Chinese workers to take legal action against their employers in South Korean courts.

Hong said the foreign ministry will set up help desks at its embassy in Beijing and its consulate in Qingdao.

An existing network of offices run by the Korea Chamber of Commerce and Industry and the Korea Trade-Investment Promotion Agency will be used to advise businesspeople.

More than 19,000 South Korean companies are operating in China, with their total investment amounting to some $21 billion. Some 95 percent of them are small and medium-sized enterprises.

(China Daily February 21, 2008)

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