A Study On The Issues And Countermeasures Of Foreign Direct Investment To China By Korean Enterprise

Korea’s FDI in China has been the major impetus for the rapid growth of bilateral economic linkage. Korean investment in China has contributed to Korea’s trade growth and competitiveness improvement, and it has benefit the Korean trade surplus and decreases Korean trade conflicts with other countries. In the meantime, Korean investment also has had a positive effect on employment, tax revenue, trade with other countries and industrial competitiveness in China. Since2002, China has replaced the U.S to become the largest investment destination for Korean FDI. Therefore, Korea’s FDI will play more and more important role in bilateral economic linkage.In China, with its accession to WTO, there are some changes to the country’s FDI utilization. Multinational companies have been increasing their investment in China rapidly, and the service industry has become a new hot spot for foreign investment, which entailing a new environment for Korean investment in China in the future.In view of the outlook for China-Korea investment cooperation in the future, there will be some changes to Korean FDI in China. Korean conglomerates will play an increasingly active role in the future more Korean investment will be directed to the central area of the economy and the share of investment environment will become more convenient due to its accession to WTO, while its high economic growth, the ’Western Development’ strategy and the last2008Olympic Games offered a lot of business opportunities. All these changes mean that investment cooperation between China and Korea will be strengthened in the future.However, China tried to change the FDI-investment policy in ’The11th5-year Plan for Economy’ which was announced in November2005. As the policy has been changed, the investment to china is losing its attraction. Before this change, Chinese market was attractive because of low wage and amount of labor force. However, after this policy, Chinese market is progressing to the capitalized and well-developed market. Thus, Korean enterprises must find out the way to manage this change. The methods are:First, Analyze and understand China as perfect as possible. Recognize the change of government policy, law and system. Based on these information, build a new and long-term investment strategy. Second, don’t invest to China to use the labor power in a low wage. Third, invest to the inland of China (central and western part). Fourth, always keep the law and run the company honestly. Fifth, investment to the3rd industry such as finance, leisure and transportation should be considered.The Chinese market with1.3billion people is a really good opportunity for us. However, many Korean enterprises have been failed in the Chinese market. It is the result of unprepared investment, expecting only the large market and low wage. In the future, the investment to china will not be easy. Thus, Korean companies should strengthen the power in Chinese market with firm analysis and preparation.