Goodbye Koreatown

Beijing and Shanghai are home to tens of thousands of Korean nationals whose lives and businesses have been hit hard by the snowball effect of the downturn. The Korean won’s decline against the RMB forced many Korean businesses to scale back or close down, and drove up the relative price of education in China. An exodus of failed business owners, out-of-work foreign employees, and foreign students left shops and services competing for a substantially smaller Korean population, and has driven many of them out of business, too.

The cover feature of the March 16 issue of CBNweekly profiles a few Koreans living in the communities of Wangjing (望京) in Beijing and Gubei (古北) in Shanghai who have decided to remain in China despite economic uncertainties.

The article paints a grim picture of the year’s economic outlook for Korean businesses in China, but concludes on an upbeat note by quoting the head of the Korean Chamber of Commerce in Shanghai, who echoes Premier Wen Jiabao’s call for “confidence” amid the crisis.

“I’ll be back. Opportunities only come to those who are prepared.” Han Sang-yun,* a 42-year-old Korean, said that he would return to his beloved real estate business in the future. He currently serves as deputy general manager of Shanghai Kuanbo International Trade Co., Ltd.

For the past few months, he has been constantly sending off his friends, including one who had spent five years in China as a real estate broker before returning to Korea at the end of 2008. Han gave him a farewell dinner at a restaurant in Gubei. Only a few months ago, Han would never have imagined that his friend would leave China so soon. “Circumstances forced him to leave,” said Han. “If it weren’t for the economic crisis, he’d be doing great.”

Han Sang-yun has been in China for seventeen years, and he’s planning on staying.

More than a thousand miles away in Beijing, Yuhn-Sihk Pahk, former general manager of LG Building Development Company, was in the middle of seeing off one of his friends at the Sambuja (三富者) Korean restaurant. “For Koreans, if you don’t have a meal, you haven’t given a good send-off,” Pahk said. “Beijing used to be quiet and inexpensive compared to Korea, but it’s completely the opposite now.”

He retired only a few months ago. In Beijing for fourteen years, this is the first time he’s seen so many of his friends return to Korea. But he still plans on staying in China.

Koreans living in Shanghai and Beijing are making different choices as they face reality.

According to Shanghai’s Immigration Control Department, Shanghai had 22,736 long-term Korean residents at the end of 2008. However, because many Koreans are here on visiting business visas, actual numbers are far greater. The Korean consulate in Shanghai estimates that the city currently has more than 40,000 Koreans, 20% down from the beginning of 2008, meaning that more than 10,000 Koreans have already left Shanghai.

Sambuja Restaurant is located in Beijing’s Wangjing neighborhood, a residential area in the northeast corner of the city. At the beginning of 2008, it was home to around 70,000 Koreans. But Korean Community China estimates that by the end of the year, more than 20,000 had left Beijing, and departures have continued to rise in 2009. KCC, a community organization, is based in central Wangjing.

Wangjing Experimental School has the largest population of Korean students in the city. In mid-2008, one-fifth of its more than 1,000 students were foreign nationals, and 80% of those were Korean. The neighborhoods of Xiyuansan, where the school is located, and nearby New District make up Wangjing’s Korean center. On the first day of school after the winter holiday, the school’s clean classrooms looked more spacious than usual because of the number of empty seats. International department teachers estimated that nearly half of the Korean students had not returned to class.

“When China-based Koreans first moved from the international apartments near the Asian Games Village to Wangjing, it was because an international school was recruiting Korean students,” a KCC vice-director told CBNweekly.

Two of the students who did not return to class were Kim Min-jong’s eleven-year-old nephew and fifteen-year-old niece.

“The exchange rate used to be 140 won to 1 RMB, but now it’s 220 to 1. This means that after conversion, tuition has nearly doubled.” Difficulties related to living in China are not unknown to Kim, who is studying acupuncture and tuina massage at the Beijing University of Chinese Medicine. A few months ago, his brother took his two children back to Korea after he could no longer handle the 12,000 RMB apiece he had to pay in annual tuition.

In his fifth year of college, Kim pushed to stay in China until he graduates, but at least half of the Korean students in lower levels have interrupted their studies to return to Korea.

The Korean exodus has driven rents down by 20%, and even the market price of vegetables has fallen. A few Korean stores that have been in operation for years have gone under because their customer base no longer exists, and “for sale” signs can be seen in stores all throughout the once-bustling eatery street. The Weitan Korean Restaurant, located on the first floor of the Wangjing Stadium, is one of them. Due to the economic slump, the restaurant’s Korean owner left for Korea at the beginning of January to raise money but never came back, abandoning the business he had spend six years building and walking out on debts to his landlord and suppliers. His employees, not having received their salaries, have gathered here and are unwilling to leave.

“Lots of small- to mid-sized Korean businesses in China have gone bust in the financial crisis, and their owners have returned to Korea,” a staffer at the Korean Embassy’s economic section said. “But at the moment we don’t have any numbers for how many companies have gone bankrupt.”

Inside the Happy Korean Restaurant near Wuzhong Road in Shanghai, a Korean-speaking server said that there were fewer Korean customers than last year. Chen Ping, an agent with Hongmin Real Estate on Jinhui Road, told CBNweekly that at the end of 2008, homes in the area had been dumped at prices that ran 1,000 to 2,000 yuan less than the average market rate, and the majority of these had been sold by Korean owners. Meanwhile, in Shanghai’s Jinxiu Jiangnan area, which also has a dense Korean population, average housing prices have dropped from 19,000 to 15,000 yuan per square meter because of the departures. The neighborhood association estimates that from the middle of last year through the beginning of this year, more than 10% of the 1,000 Korean households in the area have moved away.

The dismal climate has even affected major Korean commercial conglomerates. The Lotte Group’s Intime Lotte mall in Wangfujing halted all shuttles to Wangjing on January 25. The major shopping center, which opened in August 2008 and features an ocean of luxury Korean brands, sought to attract Korean customers by putting half of its 20 shuttle buses on routes servicing Wangjing. Every two hours from 10am until 7pm, two shuttles headed for the Lotte Mall would set off from different neighborhoods in Wangjing. But they ran empty much of the time, so Lotte eventually shut down the money-losing service.

Yuhn-Sihk Pahk and Han Sang-yun can feel the changes taking place around them.

In 2006, when he was general manager of LG Building Development, Pahk bought an apartment in the Top Aristocratic development, in the still-quiet Wangjing area. Just two years later, Wangjing is now home to large shopping centers like Hualian, Jiamao, and New World, as well as seven or eight hypermarkets including Wal-Mart, Carrefour, and LotteMart. It has even more commercial floor-space than Beijing’s Xidan commercial center .

“This used to be a place where I could sleep, but now I’d say it’s a place that has everything I need,” Pahk said.

Supermarkets with Korean signs, clerks in stores and even banks who speak fluent Korean — all of this is convenient for him, but it’s caused his decent Chinese to regress a little. “It’s been fourteen years, so I have more friends here than I have in Korea,” he said.

When Han Sang-yun was still in real estate, he selected a relatively expensive apartment in Gubei because it was where his Korean friends had gathered, and the place was filled with shops catering to a Korean clientele. Although it is on the outskirts of urban Shanghai, housing prices in Gubei once reached a stratospheric 40,000 yuan per square meter. Even today, after so many Koreans have left, rates are still more than 20,000 yuan.

“Lifestyle differences and the language issue mean that we like to visit shops run by people from Korea or ethnic Koreans,” Kim Min-jong, the medical student, said. “But today, Korean goods, food, haircuts — everything is more expensive than in Korea, so we don’t go to restaurants there very often. I eventually discovered that a lot of shops and companies I knew had gone out of business.”

“Lots of Koreans came to China to do business because labor costs were low and materials were cheap. But since labor has gone up and materials have gotten more expensive, they’ve begun to drop out,” Jung Hyo-kwon, president of the KCC, said. “The financial crisis has indeed had an effect, but I believe that those companies lacked a solid foundation and were unable to withstand it.”

Before they left China, Kim Hyeon-jin and his wife sold their home furnishings to a junk dealer in the Xiyuansan community, where they had lived in building 319. The advertising business Kim ran had failed, so they were about to return to Korea. He had lived in Beijing for four years, but he had to sell off all his furniture, which he couldn’t take back with him. “We used to work with big Korean companies, but they’ve cut down on their services, so we have to go back.” Like many Koreans in China, Kim cannot speak Chinese, and his wife can only provide simple translations for him. Because of all of the moving, Zhao Jing, the neighborhood’s junk dealer, closes a “huge deal” practically every week.

Similar situations form part of the long-term experience of Yuhn-Sihk Pahk and Han Sang-yun.

In 1995, Pahk arrived in Beijing to work on preparations for the construction of the LG Towers. Beijing’s straightforward atmosphere reminded him of the childhood he spent at his grandmother’s side, but that feeling quickly vanished in the midst of fast-paced development.

At the time, there were not yet any tall buildings along Beijing’s Chang’an Avenue, and policies to approve them were strict and conservative. During the arduous application process, plans changed from box towers to cylindrical towers, and the tops were sliced on a diagonal to ensure that the diplomatic apartments across the street would still receive enough sunlight.

The Asian Financial Crisis of 1997 put a halt to tower planning. During the construction process that came later, Pahk encountered moving problems he had never experienced overseas, and then SARS in 2003, all of which pushed the project’s completion date back until 2005, ten years after planning began.

Pahk has stayed in China with the LG Towers. “The building is my child,” he said. When talking about the LG Towers, Pahk becomes emotional: “I had the option when I retired to choose whether to go home or stay, but for the sake of my child I remained here.”

Although his retirement coincided with the onset of the financial crisis, it did not affect the income of Pahk or his colleagues.

“Five years ago, the company decided to pay salaries in local currency. So in China, employees receive RMB,” Pahk said. LG Towers did not see its business suffer much. “There was some effect, but it was mostly the cancellation of certain expansion plans on the part of multinational companies — they didn’t increase their rental space. But office buildings haven’t been hit too hard.”

Nearly twenty years younger than Pahk, Han Sang-yun came to China three years before him. His life has followed a similarly circuitous path.

In 1992, while he was still in college, Han came to China to take a year of Chinese language instruction at Tsinghua University. After graduation he joined Daewoo’s real estate investment business in China. In that capacity, he took part in the construction of Beijing’s Kerry Center, the Daewoo Hotel in Yanbian, and the Guilin Sheraton.

When the 1997 financial crisis hit, his company, once the mentioned together with Hyundai and Samsung, was unable to continue to invest in real estate in China. In 2000, Han was recalled to Korea. In 2001, he returned to China, this time with Hyundai-Kia.

“I refused to give up real estate,” Han said.

In 2004, he left Hyundai-Kia to serve as Shanghai office director for Woolim, one of Korea’s top five construction companies. Woolim@Taiji, a project in Kunshan, was the first development by a Korean real estate company in Shanghai. Han was involved from land acquisition all the way through the completion of phase one sales. This gave him confidence.

In 2007, he left Woolim and, together with some friends, started the Hannan Real Estate Company, which partnered with the Super Ocean Group on a commercial development in Tongxiang, Zhejiang Province. He believed that even if his own real estate venture failed, his experience at Woolim would allow make it easy for him to find a job at another well-known company.

However, events developed in direction he had not anticipated. Last year, Han saw circumstances take a sudden turn for the worse, and the Hannan-Super Ocean project in Zhejiang was suspended after dismal initial sales. He tried to find another company to take it on but no one was willing.

“When I left Woolim for Hannan, I was very proud at first, and very confident. I believed that I could do anything, and I set my sights very high. But when the financial crisis hit, I discovered that lots of things were headed in the wrong direction, and I was unable to find work in the real estate field.” He became unemployed.

“I had to support my family, and if I wanted to remain in China, I needed to change fields,” Han said. After three months of running into closed doors, he was forced to abandon real estate. He joined Kuanbo International Trade, an importer of Korean-made tempered glass food containers. The company has been in operation for five years and has annual sales of around 40 million yuan.

For them — the Korean businesses and businessmen who have stayed behind — “confidence” is their greatest weapon in facing reality.

“At the meeting to start the year, the boss said that our one task this year was to survive,” May, a Chinese employee at Hyundai Heavy Industries, told CBNweekly. Although the powerful company had encountered a few problems, it has no plans to lay anyone off or transfer any Korean employees back home. May’s boss Mr. Kim, a Korean, will return to Korea when his term expires, but another Korean manager will arrive to replace him.

“I like it here. I don’t want to lose Shanghai,” said Mr. Kim, unwilling to leave.

Christine Lee has the same feeling about Beijing. She is the head of Beijing-based Echo Flowers, a small flower shop that counts among its clients major Korean companies like Beijing Hyundai, WooriBank, Samsung, and SK. Business has suffered somewhat because of the financial crisis: “Individual orders have fallen, and major customers who used to be generous in their flower orders may only buy a few now as a gesture.”

But Lee is still confident. In 2003 she opened a shop at Beijing’s Laitai Flower Market, but a major fire consumed all of her assets, and destroyed her passport as well. She still remembers the difficult days that followed: “In light of that situation, the difficulties today are nothing,” she said. “Everything will get better.”

As he works at the trade company, Han Sang-yun is studying for a master’s degree at Tongji University’s Department of Construction Management & Real Estate. He hopes to use his advisors and classmates to network in the real estate sector, and he is waiting for conditions to improve enough to allow him to get back in the game. “I love real estate, and I’m good at it. I’m studying now to prepare for when things get better.” Kuanbo, where he works, is planning to expand this year and is seeking to hire sales managers and designers.

“This is a time of reform for Korean businesses in China. The ones remaining are working hard to survive, and that hard work will not be in vain,” KCC president Jung Hyo-kwon said.

A Korean telecom company* is another business that is going against the tide: it produces wireless modem cards for notebook computers, and initially entered the Chinese market in 2002. But the technology of Chinese companies quickly caught up and the company abandoned its China operations last year. However, the company recently opened a new office in Beijing’s CBD area and is preparing to relaunch. It hopes to “take advantage of the government’s push to stimulate the economy.”

“There are more than 3,200 Korean companies in Shanghai, including 500 that came in during 2008.” Kim Kuk-tak, head of the Korean Chamber of Commerce in Shanghai and head of eKorean, said that in the first half of 2009, new Korean businesses were still coming to Shanghai, although not very many of them.

eKorean’s primary focus is providing information and agency services to Korean enterprises in Shanghai. Despite the effects of the financial crisis, its business is still growing. In 2008, business volume grew 40-50%, and the company is preparing to expand even further.

For Han Sang-yun, who dreams of returning to the world of Chinese real estate, 2009 is a year to simply survive. If he can make it through, there’ll be opportunities to re-enter that field. For retired manager Yuhn-Sihk Pahk, 2009 is an entirely new year, one in which he leaves behind the nine-to-five life. After a lifetime in the construction sector, he will now serve as a consultant and partner to Chinese construction companies, and together they will seek out opportunities in China.

---

Note 1: Romanization of Korean names has been taken from other published sources whenever possible: Yuhn-Sihk Pahk (朴允植) from LG Towers materials; Jung Hyo-kwon (郑晓权) from Korean Community China materials; Christine Lee (李美敬) from news reports on Echo Flowers; Kim Kuk-tak (金国泰) from whois info for eKorean. Han Sang-yun (韩尚允), Kim Min-jong (金敏钟), and Kim Hyeon-jin (金玄震) are generic romanizations. Corrections are welcome.

Note 2: The company name given in the article, 保罗电信 “Baoluo Telecom” (Paul Telecom?) is only a phonetic approximation; the actual company name is unknown to the reporters or to us.