Downturn drives expat exodus from Shanghai's Little Korea
By Patti Waldmeir in Shanghai and Kathrin Hille in,Beijing

Published: February 25 2009 02:00 | Last updated: February 25 2009 02:00

Until recently, half the 100,000 Koreans who had made Shanghai their home lived clusteredon the outskirts in "Little Korea", a district where the street signs are in Korean and the shops sell LG kimchi, pickled cabbage, and other products catering to their tastes.

But with the economic -crisis hitting the South Korean economy and currency hard, Little Korea is being rapidly vacated.

Korean companies are shipping workers home, cutting off school fees and repatriating wives and children without their menfolk to cut costs.

They are the first large wave of expatriates to have begun leaving China's financial capital as a result of the global economic crisis. But their departure raises the prospect of a broader exodus of foreigners who may take investment, skills and job creation opportunities with them.

The press officer of the South Korean consulate in Shanghai could not answer questions about the exodus of her compatriots - because her post had just been abolished and she was being sent back to Korea.

Kim Hee-won, president of Seoul Plaza, Little Korea's central shopping complex, estimates that 20 per cent of Shanghai's Korean population has returned home - many of them in the past few weeks.

"Almost no one comes in any more," says a clerk in Seoul Plaza's golf boutique. Throughout Ms Kim's 4,000 sq m department store, Korean-speaking staff loiter next to Korean-branded toys, clothing and furniture, with no customers in sight.

Japanese relocation companies, meanwhile, report a marked rise in families returning home to Japan from Shanghai compared with last year. They expect the pace to pick up further during the traditional peak relocation months of March and April.

Each of the Japanese housewives minding toddlers at the vast Mandarin City housing complex, where an estimated 70 per cent of residents are Korean or Japanese, say they know at least one family that has been sent home while the breadwinner remains in China.

The Japanese consulate estimates there were 48,000 nationals in Shanghai 18 months ago, but says it has no figures for the number that might have left since.

The pain has not been limited to Shanghai. A parent with children enrolled in an expensive Beijing international school says most of her daughters' Korean classmates have left the school almost overnight.

A labour activist in the northern province of Shandong, where Korean investment has totalled $23.4bn (€18.4bn, £16.2bn) since 1988 and has accounted for 40 per cent of total foreign inflows, says the owner of a Korean-invested furniture factory left before the Chinese lunar new year in January and it has yet to reopen.

Korean groups invested $99m last year in Chengyang, a district of Qingdao, Shandong's biggest city. While that still made Koreans the largest source of foreign direct investment in the area, their share was down almost 10 percentage points to 29 per cent.

Some Korean factory owners in Qingdao have left without paying workers or suppliers. The entire Korean management of Yantai Shigang Fibre vanished last year, leaving debt and thousands of workers jobless.

"I would guess that even more have been closing since then, given the worsening macroeconomic environment," says Prof Yuan Xiaoli, of Qingdao science and technology university.

Back in Little Korea, Ms Kim says the flow of Koreans is not one way. "Workers are going home, but entrepreneurs are coming here from Korea," she says. "Our Korean people think [that since] China is bigger than Korea, there must be more opportunities here than in Korea. There is no dream in Korea, but our Korean people think there is still a dream in China."

Ms Kim is putting her money where her mouth is. She is planning to open a big golf goods store in Seoul Plaza early next month.

Additional reporting by Yan Jin in Shanghai
Copyright The Financial Times Limited 2009

한국인들이 상하이에서 탈출하고 있다. 중국에 진출한 기업들이 위원화 상승에 대한 압박을 견디지 못하는 듯 하다. 이는 비단 한국만의 문제는 아닐 것이다. 중국의 외국자본이 빠져나가고, 현지법인이 철수하면 중국내수도 줄어들게 분명하다. 중국은 미래의 희망이지만 지금은 중국에 투자해서는 안된다고 했던 그의 말이 맞았다.