A Study On South Korea Direct Investment In China

With the gradual formation of the world economic integration, many different countries are economically speaking, relating with increasingly close ties. Each and every country has seized the opportunity of the world economic integration, to invest their money abroad for production or business, seeking cheaper local labor and broader market space of the host country, so as to reduce the cost of production and increase profit.After China’s accession to the World Trade Organization (WTO) and the formation of an all-round, multi-field pattern of opening to the outside world, trade barriers have gradually decreased; coupled with the optimization of relatively advantageous resources and the investment environment, China is attracting a large quantity of foreign investment. South Korea, whilst being China’s neighboring country, has made use of the geographical advantages to intensify direct investment into China. Although having set out relatively late, the rate of expansion of Korea’s direct investment in the Chinese market being fast. South Korea has already ascended to being China’s third largest source of investment. The analysis of the effects of this direct investment can not only help with the development of Korean enterprises, but can also, following the period of signature of the FTA protocol between Korea and China, help a great number of Korean enterprises to march towards the Chinese market for rich in-field experience.This thesis proposes a research using the theoretical foundation of direct foreign investment and through quantitative and qualitative analysis of this direct investment.Following the current situational analysis of the extent of Korea’s direct investment in China, the myriad of investing industries, regional distribution of the investments, types of industries, and so on, it is considered that the motives behind this investment are: to increase Korea’s share of the Chinese market; to acquire cheap natural resources; To achieve and meet the needs of an extended economy; to decrease the potential risk associated with investment.The effects of Korea’s direct investment in China include upgrade of industrial infrastructures; Localization of imports and exports; financial balance of commercial trade; market expansion.According to the analysis of motives and effect of investment, this thesis considers that there exists the following problemsi excessive centralization of investment areas, lack of localization of Korean industries, lack of understanding of the policies of the Chinese Government. In the light of the problems concerning the direct investment, the following proposition has been made. First, diversification of investment. Second, increasing the level of localization.. Third, adaptation to China’s rate of utilization of foreign capital.Following the establishment of diplomatic relations between Korea and China, both countries have kept excellent trading relations. After the signature of the Korean-Chinese FTA protocol, the latter has provided for both countries a broader space of development for direct investment.