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China–Japan row creates opening for Olive Young, Cosmax

Published: 19 Dec. 2025, 07:00

CHO YONG-JUN
[email protected]

[GETTY IMAGES KOREA]

An ongoing row between China and Japan could work in favor of Korean cosmetic manufacturers, as Chinese consumers increasingly shun Japanese products and opt for domestic brands — many of which rely on Korean original design manufacturer (ODM) firms with local subsidiaries.

Analysts also expect that Chinese travelers choosing Korea over Japan could give an additional boost to Olive Young, Korea’s dominant beauty retailer. While Korean beauty brands have lost ground in China due to growing support for local products, Olive Young continues to draw Chinese tourists as a go-to shopping destination.

Korean exports of beauty products to China peaked at $4.8 billion in 2021 and have been slowly declining to $2.5 billion in 2024 as exports to the United States and other nations rose. One of the reasons for this has been the rise in Chinese local beauty brands.

Cosmax, one of the largest foreign beauty ODM firms in China with over 1,000 Chinese brands as its customers, is considered a major beneficiary.

“Cosmetics ODM firms will benefit the most if the Chinese government decides to restrict the import of Japanese cosmetic items,” Kiwoom Securities analyst Cho So-jung said.

“China’s boycott of Korea that began in 2017 made it difficult for cosmetics firms to advertise in the country, and Chinese local brands took their place,” Shinhan Securities Researcher Park Hyun-jin said in a report released Dec. 9, adding that the same will happen when China decreases its imports of Japanese cosmetics.

While the boycott of Japanese products alike might not result in a bounce for Korean beauty firms, the ODMs may be the biggest winners, according to analysts.

“There's a high chance of the Chinese local brand market share increasing if there is a vacuum in Japanese products in the market, which will lead to more orders for ODMs with manufacturing facilities in China.” The Kiwoom Securities analyst also speculated that Japanese brands can also sign manufacturing contracts with Korean ODMs in China, further benefiting Korean firms.

Korean ODM firms like Cosmax, Kolmar Korea and Cosmecca Korea, instead of designing and manufacturing beauty products for Korean companies in China, have been signing deals with Chinese beauty brands to design and manufacture Chinese cosmetics for the local market.

Cosmax China in Shanghai, China [COSMAX]

“Chinese customers are no longer queuing to buy Korean cosmetics; they are instead buying Made in China,” Sookmyung Women’s University Business Administration Professor Suh Yong-gu said. The professors explained that firms like AmorePacific and LG Health & Household, which had a prominent space in the Chinese market, have and will be struggling if they continue to rely on the Chinese market.
The Chinese government has also announced plans in November to boost its consumption sectors, which include the goal of its cosmetics industry reaching 100 billion yuan ($14.2 billion) in terms of market size by 2027.

In line with the trend, Cosmax opened its 60,593-square-meter (652,210 square foot) joint venture factory with Yatsen Holding in 2023 — the parent company of Perfect Diary, Galénic and Dr. Wu — and is currently building a 130 billion won complex in Shanghai that will be capable of research and development (R&D), manufacturing and marketing all in one location. The company currently has over 1,000 Chinese beauty firms as its customers, and while many are not disclosed to the public, Perfect Diary and Florasis are some of the better-known local customers of Cosmax.

“The new Shanghai complex will increase the production capacity by 100 million units per year — but more importantly, it’s a symbolic accomplishment as a Korean firm, as not many have been building and opening new facilities in China,” a Cosmax spokesperson told the Korea JoongAng Daily.

Cosmax’s two factories in Shanghai and Guangzhou logged 574.4 billion won ($388 million) in revenue this year alone and are expected to rise to 615 billion won this year and 688 billion won in 2026, according to Meritz Securities. Around 95 percent of the products manufactured at Cosmax’s Chinese plants are for Chinese firms, according to Cosmax.

The strength of Korean ODMs in China lies in their R&D process that happens locally in the ODM’s facilities in China, instead of using the same formulas made in Korea for the K-beauty firms.

Kolmar Korea, too — best known as the sunscreen manufacturer of Korean brands like Round Lab and Beauty of Joseon — has been implementing a similar plan. Kolmar Wuxi, capable of producing 550 million units of beauty products each year, has been utilizing its Korean resources and infrastructure while also localizing its R&D abilities to cater to the Chinese market. The company also mainly does business with the Chinese cosmetic firms in the country.

Workers at Kolmar Wuxi in China [KOLMAR KOREA]

Despite the company's Chinese arm suffering from a decrease in revenue in the third quarter, the firm hopes to bounce back.

“We were recently affected by the lower than expected performance of some of our customers, but we are increasing our customer count in the country to tackle the issue,” Kolmar Korea said, adding that the average number of clients that the company trades per month rose by 15 percent on year, compared to 2024.

And while the popularity of K-beauty in China is facing strong competition from local challengers, Olive Young will still be the must-see spot for Chinese tourists when they visit Korea, according to analysts.

“The chances of Chinese travelers choosing Korea as an alternative destination to Japan are increasing and CJ Olive Young will be the firm that will benefit from it,” Shinhan Securities Researcher Park said.

BY CHO YONG-JUN [[email protected]]