Reasons Of Korean Companies' Divestment From China

Since the establishment of diplomatic relations between China and South Korea in 1992,China-ROK economic and trade relations have developed day by day,and South Korea's direct investment in China has been expanding.China surpassed the United States as the largest overseas investment in Korea in 2002.However,since the outbreak of the global economic crisis in 2008,the world's economies have been affected to varying degrees,and South Korea's direct investment in China has undergone major changes and new trends,some South Korean companies divested from China to change the investment in China Program.In China's active response to the economic crisis,we should pay attention to South Korea's direct investment in China changes that could minimize the loss of such actions.First of all,based on the research results of divestment at home and abroad,this paper analyzes the current situation of foreign divestment in China and the influence on the host country.It is found that foreign investors who are divested in China are mostly investing in labor-intensive industries,export-oriented small and medium-sized enterprises,and the phenomenon of divestment occurred in China's coastal areas.It mainly indicated that the withdrawal of Chinese enterprises in China are mostly high energy consumption,high pollution,labor-intensive industries.Such actions are the inevitable result of China's industrial upgrading and development.At the same time,this paper analyzes the changes of Korean disinvestment action from China and Korean perspectives:From Korea's side,export decrease as well as international competition to attract Korean investment and China's human,environmental costs rise and China's foreign policy changes are the main factors affecting the withdrawal of Korean enterprises in China.From China's perspective,its investment environment,China's human capital,environmental costs,foreign policy are the main reasons to affect Korean's investment.Thirdly,this paper takes the Korean enterprises in Qingdao as an example to carry on the empirical test.The results show that for China,the export tax rebate policy,increase in energy cost and import of Korea are the most important factors driving Korean enterprises to divest the main factors.For China's labor costs,although the increase is more significant,but for the entire industrial structure wage level is not a result of Korean enterprises to withdraw the decisive reasons.Finally,this paper puts forward some suggestions on how to attract South Korea's direct investment from the perspective of stimulating the further investment of Korean enterprises to China.Also,this paper gives some suggestions on how to perfect the early warning mechanism of divestiture and optimize the investment structure of Korean-funded enterprises,so as to promote South Korea Continued and healthy development of investment in China.