The bankruptcy of Daewoo Motors has once again brought attention to the development model of South Korea's automotive industry. In the past, some Chinese experts suggested that China should follow the Korean path, which was seen as a successful example of rapid industrial growth. However, China ultimately chose a different route. Now, with Daewoo declaring bankruptcy and the broader South Korean auto industry facing challenges, many are re-evaluating whether this model was truly sustainable. While it may seem that China was lucky to avoid following the Korean model, there are still lessons to be learned. The collapse of Daewoo highlights the dangers of rapid expansion without sufficient financial backing or market stability. The Korean auto industry, like many others, suffered from over-investment, excessive debt, and a lack of long-term planning. These factors led to a buildup of "bubbles" in the sector, which eventually burst under pressure from global economic shifts. China’s own auto industry is not immune to similar risks. There are growing concerns about overcapacity, redundant investments, and inefficient resource allocation. Many companies are struggling with high debt levels and insufficient profitability, which could lead to further instability if not addressed. While the government and enterprises have made progress in recent years, the overall industry still faces significant challenges. One key lesson from South Korea is the importance of gradual industrial upgrading. Rather than rushing into high-end markets before building a solid foundation, industries should focus on developing their capabilities step by step. South Korea’s attempt to compete directly with developed nations in premium car manufacturing came too soon, without the necessary experience or capital. This premature move left them vulnerable when global competition intensified. From an international perspective, the Korean auto industry also faced external pressures. Developed countries, particularly in Europe and the U.S., were wary of South Korea’s rapid rise and sought to limit its influence. This created additional hurdles for Korean automakers, who had to navigate both internal and external challenges. In contrast, China has certain advantages in the low-end vehicle market, where it can build scale and accumulate experience before moving up the value chain. However, this requires careful planning and strong financial management. The current system of relying heavily on bank loans rather than diversified funding sources is a major concern. Unlike developed countries, where social capital plays a more active role in supporting businesses, China’s auto industry often lacks such mechanisms. Moreover, cultural attitudes toward risk and investment also play a role. Many Chinese companies prefer to borrow rather than seek equity financing, which limits their flexibility and increases their exposure to financial risks. The government must also take a more active role in creating a supportive environment for long-term industrial development. In summary, while the Korean auto industry offers valuable insights, China must adapt these lessons to its own context. A balanced approach—focusing on sustainable growth, proper financial management, and strategic industrial upgrading—is essential for long-term success. The road to becoming a global leader in the automotive sector is not about skipping stages, but about building strength step by step.

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