It was revealed that 27.6% of domestic manufacturing industries are suffering damage due to China's low-price offensive. Domestic companies are adopting differentiation strategies to improve quality through the development of high value-added products.

However, as China's technological pursuit accelerates, public opinion is raising the urgent need for policies to protect domestic manufacturing.

According to data on the 'Impact of China's Low-Price Offensive on Domestic Manufacturing' released by the Korea Chamber of Commerce and Industry on the 6th, it was revealed that Chinese companies' low-price offensive is increasing again this year. This is mainly due to China's increased finished goods inventory ratio caused by the coronavirus pandemic and real estate recession.

According to the results of a survey of 2,228 manufacturing companies nationwide conducted by the Korea Chamber of Commerce and Industry, 27.6% of the responding companies answered that “actual sales and orders are affected” due to low-cost exports of Chinese products, and 42.1% of the companies expressed concern, saying, “There has been no effect so far, but there is a possibility of damage in the future.”

The most common damages caused by the low-price offensive were ‘decrease in sales price (52.4%)’ and ‘decrease in domestic market transactions (46.2%).’

The industry that suffered the most damage from China's low-price offensive was 'batteries (61%)', followed by 'textiles and clothing (46%)', 'cosmetics (41%)', and 'steel (35%)'. With demand for electric vehicles decreasing due to several recent safety threats, the battery industry is suffering a double whammy.

For example, one of the key domestic secondary battery component companies said, “We have minimized the use of Chinese raw materials due to tariffs, quality, and safety issues, but we are losing ground in the unit price competition as our competitors lower their prices by using cheap Chinese raw materials.”

China's low-price offensive is also a major threat to domestic consumer rights, as it is coming in through giant online platforms such as Ali and Temu. The average growth rate of the three global e-commerce companies has been 41% over the past five years. Consumer complaints related to overseas direct purchase products have increased approximately fivefold over the past three years, and consumer safety has become an emergency due to the insufficient product certification system and detection of hazardous substances in products.

People Power Party lawmaker Kang Min-guk said, “If a lot of China’s ultra-low-priced products are sold domestically, a serious situation could arise that will lead to the collapse of the domestic manufacturing industry,” and argued, “Since there is no legal basis to regulate overseas platform operators who violate domestic laws, we need to establish institutional measures to minimize damage to the people.”

The infiltration of Chinese companies is not just about low prices. Recently, China has been accelerating its technological pursuit by increasing its own chip manufacturing capacity in response to US sanctions on the public.

In response to a question about the gap in technological and quality competitiveness with Chinese competitors over the past five years, only 26.2% of companies responded that they were “continued to have an advantage.” The response that they were “advantaged but the technological gap has narrowed” was nearly twice as many at 47.3%. A considerable number of companies responded that they were “pursued to a similar level” at 22.5%, and there were also responses that they were “already overtaken by Chinese companies” (3.0%).

Among the responding companies, 39.5% predicted that “Chinese companies may overtake us in technology within the next 4 to 5 years.”

Meanwhile, domestic companies are preparing strategies to respond to China's low-price offensive. Among the responding companies, 46.9% cited 'quality improvement, including development of high value-added products' as a differentiation strategy. Next, they answered 'Expanding the market base through product diversification' (32.4%), 'Developing and targeting new export markets' (25.1%), 'Reducing costs such as labor costs' (21.0%), and 'Securing price competitiveness through local production' (16.1%). However, 14.2% of companies said they 'have no response strategy'.

In addition, it is urgent to establish policies to prevent the collapse of the domestic manufacturing industry due to the government's low-price offensive from China.

Domestic companies most strongly emphasized 'domestic industry protection measures' (37.4%). This was followed by responses that 'expanded research and development (R&D) support' (25.1%), 'support for new market development' (15.9%), 'expanded trade finance support' (12.5%), and 'support for FTA utilization' (6.3%) were necessary.

As protectionism in domestic industries spreads worldwide, it seems to be a demand that we also prepare more active measures. For example, in the context of AI and data acquisition emerging as national assets, 'sovereign AI' is being emphasized to secure data sovereignty from global companies.

If U.S. protectionism strengthens, it is predicted that the recovery of China's domestic economy will also be delayed for a long time. It is time for China to take quick measures to prevent damage from its low-price offensive that will not only affect the domestic market but also the overseas export market.