On Jan. 1, it was reported on the 6th that corporations' overseas retained earnings increased for the first time in five months. The government is urging corporations to bring home the dollars they have piled up overseas to slow the pace of the won-dollar exchange rate's rise, but the opposite is happening.
According to the Bank of Korea's Economic Statistics System (ECOS) on the 6th, reinvested earnings income in January this year was $1.4768 billion, rising for the first time in five months since August last year. For January on record, it is the largest since monthly statistics began in 2023. Reinvested earnings income refers to the amount that overseas subsidiaries, in which Korean corporations hold 10% or more equity, earned as profits and reinvested locally instead of remitting to headquarters as dividends, and the like.
Since related statistics were compiled in 1980, reinvested earnings income has steadily increased in tandem with Korean corporations' overseas expansion. In the 1980s, the annual income scale was less than $100 million, but it exceeded $1 billion in the 2000s and surpassed $7 billion in 2010. Since 2020, monthly income has hovered around $1 billion.
Until recently, the increase in reinvested earnings income was regarded as a natural trend stemming from corporations' expansion of overseas investment. But since the second half of last year, it has begun drawing attention as a main culprit fueling the won's weakness. That is because when corporations keep the dollars they earn overseas onshore rather than bringing them into Korea, the supply of dollars to the foreign exchange market decreases.
In response, the government also encouraged corporations to bring their overseas retained earnings back home. In Oct. last year, Bank of Korea Governor Rhee Chang-yong first pointed out the retained-earnings issue, and at the end of last year, when the won-dollar rate surged to the 1,480-won range, Presidential Chief of Staff for Policy Kim Yong-beom met directly with officials from seven corporations — Samsung, SK, Hyundai Motor, LG, Lotte, Hanwha, and HD Hyundai — to discuss the matter.
As a result, reinvested earnings income fell from $1.4928 billion in Aug. last year to $1.4301 billion in September, $1.1492 billion in October, $1.1231 billion in November, and $311.5 million in December.
However, some analysis says the renewed increase in January reflects preparations by some large corporations to allocate funds to a $350 billion U.S. investment fund being set up by the government. Jung Yong-taek, an economist at IBK Securities, said, "It appears retained earnings increased mainly among corporations that need to begin investments committed with the United States," adding, "Until last year, discussions on the U.S. investment fund had not been made concrete, but from this year the likelihood of actual investment execution is growing, so corporations will be more inclined to hold dollars."