外商对华直接投资——韩国对华直接投资研究

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第北舛镗犬亏硕Jj学位论文⑧ 捅簦摘要自从1979年进行改革"放以米，t+】国一直是世界上经济发展最为迅速的固家之一。qJ国逐渐放丌r列j二外田直接投资的限制和各种壁垒，并改善了投资JJ,J兄，．加上洲有巨大H发腱迅速f|{_『国I勺nJ场，以及相对来说训练有素的人lJ和低成本的劳动力，使得中国r{益成为外固投资的热上。中国加入世界贸易组织更加速了这一趋势。跨国公司在此过程中扮演着不容忽视的角色。相近的文化特征和地理优势，中国发展迅速的经济以及韩国自身发展当中m现的问题．都加速了巾国和韩国之间的贸易和投资往来。两因之间的经济发展已经紧密相联。根据韩国国际商会的报告，韩国对华投资额1999年到2003年翻了3倍。韩国已经超过美国和台湾成为第：{大剥华投资国。为了更好地丌发和利用韩幽对华投资，必须要对于全球和韩国对华投资的状况和趋势有一个清楚的认识。本论文的主要目的就是要研究外商对华投资．尤其是韩幽刈华投资的状况。通过列举和分析由各种报告，互联网和其他相关资}：I巾获取的信息，本论文展示了外商直接投资，外商对华投资，韩国对华投资的发展，现状和趋势。最』，j，小义还为进一步促进利用韩资提出了几点建}义。关键词：外国直接投资对华投资韩幽剥华投资跨国公司 ABSTRACTThankstojtseconomicreforillbegunjn1979，Chinahasbecomeoneofthefastestgrowingeconomies．ChinahasgraduallyliberalizeditsFDIpolicyregimes，reducedrestrictionsandbarriersforFDl、andimprovedtheinvestmentenvironment．Withitspotentiallyhugeandfast—growingdomesticmarkets，relativelywell—educatedpopulationandlow—costlaborforces，ChinahasbeconreoneofthemostattractivedestinationsforFDlChina’SaccessiontotheWT0alsoacceleratesFDIinflowstoChinaMNCsplayapivotalroleilltheeconomicdevelopmentofthehostcountriesandtheglobalizationoftheworldeconomy．TilegeographicproximityandculturalfamiliarityofSouthKoreacontributedgreatlytotherapidincreaseineconomicexchanges．China’Srapideconomicgrowthalsoprovidedanimpetusforacceleratingthebilateraleconomicexchanges．Owingtothesefactors，thetwocountrieshavedevelopedaneconomicallysignificantinterdependence．AccordingtoaKoreaInternationalTradeAssociationreport，KoreanFDltoChinahasrisenmorethanthreefoldbetweent999and2003．KoreahasnowsurpassedtheUSand711aiwanasChina’SthirdlargestsourceofFDI．Meanwhile．ChinaovertooktheUnitedStatesasKorea’Sprimaryimportcountry，aswellastheprimaryKorea’SFDIrecipient．ItISimportanttounderstandthesituationandtrendsofglobalFDJinChinaTileprimarypurposeofthisthesisistostudyFDIinChina，mainlyfocusesonKoreaninvestmentinChina．UsingFDIdatacollectedfromreports，Internet，andotherreferencematerials，thethesisnotonlydisplayedcurrentsituationofFDIandexpansionofMNCs，butalsoanalyzedandanticipatedfuturetrendsofFDI，especiallyKoreaninvestmentinChina．Finally，0／1thebaseofallthesestudy， ABSTRA(：TseveralproposalsareprovidedinthisregardKeyWords：FDI，FDIinChina，KoreandirectinvestmentinChina，MNCs PartITheCurrentSituationofFDIintheWorld1TheCurrentSituationofFDIirltheWorld1．1OverviewAlthoughtheamountofworldFDIflowsfellin2003forthesecondconsecutiveyear，theglobaloutlookfor’FDIremainspositive．Fundamentalforces，suchastechnologicalchange，shrinkingeconomicdistance，andtheSUCCESSofmultinationalcorporationsallseelntoprovethis．Furthermore，ongoingliberalisationofEDIandtradepoliciesisalsoplayingitspart，withnationalpolicyregimesconvergingtowardsawelcomingstanceonFDI．GlobalFDIgrewrapidlyintheI980sandl990s．Recordedglobalinflowsgrewbyanaverageof13percentayearduring1990—1997．Capitalinflowsincreasedbyallaverageofnearly50percentayearduring1998—2000，reachingarecordUS$1．4trillionsin2000．TheFDIflowsin2002，whichstoodat651billiondollars，followedtwopreviousconsecutivedeclines-一from824billiondollarsin2001and1．4trillion(ioIlarsjn2000Globalforeigndirectinvestmentflowsin2003remainedflat，at653billionUSdollars，accordingtotheestimatesoftheUnitedNationsConferenceonTradeandDevelopment(UNCTAD)．ButUNC]1ADpredictsthatFDIflowswillreboundin2004，boostedbytheimprovingglobaleconomy．7l'hemostrecentdownturnreflectstimslowdownintheworldeconomyandthecontinuedpoorperformanceofworldstockmarkets，bothofwhichdampenedinvestorconfidence．AnothercontributingfactorwastheabnormallyhighlevelsofFDlin2000，associatedwithawaveofM&AactivityinthefinancialservicesandITsectors． FDIl¨Ch⋯H～AC105eLookatSouIhKoge8’sThecontinuinglowvalueandnumberoI、cross—bordernlergersandacquisitionsfM&As)一thekeydrivel‘ol’globalF'DIllowssincethelatei980s～contl’ibutedheavilytothedowntmn．Sincetbemidof20century，CFI)SS-borderMergers&Acquisitions(M&A)hadbeenaccountingtbrmorethanthree-quartersofthetotalamountofglobalflows．111latel990s，cross-borderM&Assoaredby50percentmmually．However，thegrowthrateofCROSS—borderM&Achangeddramaticallyfrom49．3percenti112000tominus47．5percentjn200lAsaresult．inflowsdeclinedtoUS$729billionsin2001．Tileconditiondidnotchangediilboth2002and2003．Thenumberofcross．boarderM&Acasesdroppedsharplyto4493in2002，andthevalueofglobalflowsdeclined20pm-centto$651billions1112003thisnumberfelltoUS$560billions，adeclineofl8percentfrom20021．2DistributionofGlobalFD【InflowsoftoDevelopedCountriesFellDownsharply‘l'heinflowstodevelopedcountriesincreasedmarginally，from460billiondollarsin2002to467billiondollarsin2003．FheflowstotheUniledStatesrosetln’eefoldto86．6billiondollars．TheEuropeanUnion(EU)，whoseflow、sare341．8billiondollars，sawthelargestdecline，notablyinFranceandGermany．TheFlowstoJapanweredownaswelI、at7．5billiondollars．Industrialcountrieshavelongdominatedbothoutflowsandinflowsofglobalandaccountedfor94percentofoutflowsandover68percentofinflowsin2001．(Seefigure1·1)．TheUnitedStateswastheworld’slargestrecipientin2001，whichreceivedUS$130．8billions，followedbyEuropeanUnion．ttowever，in2002inflowsoftoUnitedStatesdropped77％toUS$301billions．andforthefirst2 PartITheCurrentSituationofFDIi¨tileWorldtillleinitshistoryUSbecametheworld’S4‘“recipientofFDI．followingChinaFranceandGermanyAsprimedestinationol、FDI，industrialcountriesalsoprovidedmorethan90percentol’FDIoutllows．InspiteofthedramaticdropsofFDIinflows，theoutflowsofFDIfromthesecountriesremainsbroadlyunchanged．In2003，theoutflowsofFDIfromOECDcountriesstoodatUS$576billioncomparedwithUS$567billiontheyearbefore，oranincreaseoflessthan2percent．UnevenDistributionofFDIInflowsAmongDevelopingCountriesTheregioncompositionofFDIhaschangedinrecentyears．Forth，ethirdconsecutiveyears，LatinAmericaandCaribbeanaccountedfornmchofthefallinFDIflowstOdevelopingcountriesTheregion’SshareinFDItodevelopingcountriesfelltoone—thirdsfrom43percentin1997—1999．IncontrasttothedeclineinLatinAmericaandtheCaribbean，FDIflowsintoEastAsiaandthePacificremainedstrongataround$57billionsin2003．Asaresult，theEastAsiaregion’SshareofFDItothedevelopingworldroseslightlyfrom38percentin2002to42percentin2003ChinacontinuedtosurgeinspiteoftheSARSepidemicinearly2003．China’SshareinregionalFDIrosefurther，toabout94percentin2003from90percentayearearlierFDIInflowstoMid—EastEuropeIncreasingIncontrasttothegeneraldecliningtrendsinotherregions，FDIflowstoMid_EastEuropehavebeenincreasingsteadily．Amongthem，increasingofFDIflowstoCzechoslovakia、Sloveniaismostapparent．ThevalueofFDIflowstothisregionwasestimatedtoaboutUS$30billions，alittlemorethan2002．Therewasasharp surgeinFDJtotileRussianFederationandasteadyincreaseinGreenfieldinvestmentsTherewasaboutUS$I27billionFDIflowstoRussiaintheearlyhall：yem’of’2003．1_3TileShiftingCompositionofFDITowardServicesInvestmellttrendsindicatethatinvestmellti11theservicesectoriSincreasingovertime．Ill1970stheservicesectortookonly25percentoftheFDIglobalinflow．In1990itwaslessthan50percent，andby2002itssharehadrisentoover60pm’centoI’globalFDIinflows，orUS$4trillion．Overthesametime，theprimarysectors，miningandpetroleuminparticular，declinedfromninetosixpercent，whilethatofmanufacturingdeclinedfrom42to34percent．Thecapitalsofmultinationalcompaniesmainlyflewtofinance、powerandpublicfacilitysectors．Onaverage，between200land2002servicesectorreceivedIJS$500b川ioninvestmenI．Figurel—IGeographicalDistributionofFDIFlows(Percentageofworldtotal)lnflowsOulflowsRegio¨，Cou¨toyl995一1995．19992000200I19992000200II)evelopedcountries67582368489l922935EuropeanUnions37054243957．4702588UnitedStates23620216919612．0l84I)evelopingcountriesAndecollomles293592791067659AIrical506231)40．04LatinAalericoandtheCaribbeanII764Il6306l2AsiaI69¨1397l5．951CentralandEasternEurope32l837040306World100l00lOO100’'otu‘rP．Il，0J‘IdInvestmemReport2002一Ibnsnational(’orpofalionsandExportCompetitivenessP2654 Part1I'lle(1urrentSituationofFDIintheWorldTheDistributionoftheWorld’sInflow’sofFDIft988--2001)(MillionDollars，percent)PrimarvSeeondaryServiceAHSectors0tilersIndustryIndustrvIlidustryTogether。1988Totalvaluel0364527764665310044119837Ratio86440389841001997’rotalvalue161)5715l471J17202220848360408Ratio4542()477581001999TotalvaIue2(Jl867512l24I827282919563633223Ratio54l6503251002000‘rotaIvnIue409028050849706830】23990Ratio3226685100200lTotalvalue6940I488045940472072520Ratio962()563365100Recently，ItSBCU．KacquiredanUSfinancialcompanyHouseholdInternationalwithUS$14．5billions，whichwasthelargestacquisitionin2002．Inthesecondhalfof2002，severallargetransnationalacquisitionsalsotookplaceinservicesector．Forinstance，FranceTelecomacquireda(JernlenmobilephoneoperatorMobilcom；SwedishcompanyTliainvestedUS$5．8billionstopurchaseaFinnishtelecommunicationsoperatorSoneraOyj ¨)IInChina⋯ACluseLookatSouthKol。ea’sFDIPart2GlobalExpansionofMultinationalCompaniesMultinationalcompanies(MNCs)havenraintainedcontinuousgrowthandlong—termviabilitybyexpandingbeyondtheirhomecountriesintomarketswithpromisingopportunities．MNCsalsoplayapivotalroleintheeconomicdevelopmentofthehostcountriesandtheglobalizationotltheworldeconomyDespitethedownturninglobalFDIinflowsin200l，multinationalcompanies(MNCs)representasignificantandgrowingforceintheglobaleconomy．TheUnitedNation’sCommittee‘)fTradeandDevelopment(UNCTAD)(2002)estimatesthattherearenowsolne65，000MNCs”7engagedininternationalproduction，withabout850，000affiliatesoperatingabroad．In2000theworld’slargest300MNCsofferedtwo—thirdsoftheproductssoldinwesternworld．TheglobalFDIstockreachednearlyUS$7trillionin2001andforeignaffiliatesaccountedforanestimated1percentofWorldGDPin2001，comparedto7percentjn】9902．1CharacteristicofMNCs’FDlMNCsofDevelopedCountriesfakeDominantPositioninGlobalDirectInvestmentAtpresentMNCsofdevelopedcountriescontributed85％ofglobaloutflowsofinvcsl．nlentbyvalue．Amongthem，UnitedStates、UnitedKingdom、German、FranceandJapanarethefivclargestFDIhomecountries．About75percentofthe65000MNCsalelocatedin23developedcountries，25percentindevelopingandprivatizingcounl．ries．Ofthe100largestMNCs，86areUS、EUandJapancompanies，whosecapitalsaccountedfor88percentoftotalvalue．Thatis，MNCsofUS、EUandJapanconstitutetimthreecentersoftheworld’stransnationalilwestmeut．6 Part2GIobaIEXI'aIlSiOnofMultinatiollaICOlrlpaniesFigure2-1Top5FDIllostCountries(milliondollars)Ran199019981999kl50497US104920US42510UK207457UK2604042US37200IJK62442UK22055USl554IOBL203720334824German42726GeTmall89678BL120283rmnce1694814Germanv24195France35488France4570lFmnce119494US52440SUK20124Japan2605937226GelmaHv109797IIolland74809[ISMNCsStilltlaveAbsoluteAdvantagesinGlobalCompetitionUSistiletoponeuomattermeasuredbythealllountofFDI、thescaleofIvlNCs、orbythelevelofcompetitivecapability．OnthelistsofFORTRAN，UScompaniesalwaystookone—thirdsofthetop100MNCs．ThetotalvalueofUSFDIhasbeenwithinthetopfive．(Seefigure2-1)TransnationalM＆AsBecometileMainMethodsofMNCs’FDIGlobalmergerandacquisitionactivitiesareontherise．Businessexecutiveshaveadramaticallyrenewedappetiteformergersandacquisitions，withmorethan70percenteithercurrentlyundertakingallM&AtransactionorplanningtodoSOwithintilenextyear，accordingtotheresultsofaglobalsurveybyAccenture．MNCs’investmentsabroadusuallyeithertaketheformofGreenfieldlnvestmentorMergers&AcquisitionsrM&As)．incomparisonwithGreenfieldinvestment，M&AshasquiteafewadvantagesThroughM&AsMNCsmaysavetheirtimeandcost，increasesharesinthetargetmarket，gettheacquiredcompany’Sintangibleassets，andevadethegovernmentregulationsofthehostcountries．Therefore，M&AshadgraduallybecometheprimeinvestmentmeastlresforlVlNCssincemidof1990s’．7 FDIIl-Chil|a—ACIo～eLookatSouthKorea’sFDlSince1995thevalueoftransnationalM＆AShasbeenaccountedfbr70％to80％orglobalFDl．In2000thetotalvalueofM&AsofMNCsincreasedtoUS$1．14trillions，accountingfor87．9％oftotalan-lo,untofglobalFDI．rSeeFigure2—2、．ItisestimatedifM&Ascontinuallyincrease30percentannually，thevaluewillincreasetolnorethanUS$3trillions．Figure2-2GlobalandM&Asvear7IotalamoulllofValueofM＆AsagcouutforGlobalFnlrransnatiomlM＆AsThetotalamountof(iIillifmdollarsJ{Billiondollars}GlobalFDI(percent)—1995328722969719963589275764199746433427371998643941I638J99986507208322000l300o11430879Resollrce：Wol‘[dltll’eslme，llRepol。，1996—2002．2Tl’endsofⅣ烈CS’FDIMNCs’FDIiSShiftingtoServiceSectorBecauseofthepositiveeffectsonproduction，employment，tradeandconsumption，countries，especiallyindustrialcountriesnowlaymoreimportanceonservicesectorflheindustrialstructuresofindustrialcountriesaregraduallydominatedbyservicesector．ServicesectorbecomethemainfieldinMilchMNCsinvest．Meanwhile，theinvestmentsamongdevelopedcountriesareincreasing，AccordingtothereportsofUNCTAD，servicesectoraccountsfor20percentofthetotalvalueofglobalin1970s’，theratioincreasedto25percentin1970s’，40percentinmid1980s’，and8 morethan50percentin1990s’BoththepopularityofeconomyliberalizationandthematureoflinanceandstockmarketcontributedgreatlytoFDIoI’developedcountries’M_NCs．MNCsBOOStOverseasR&DMNCsusedtoperformmostol’theirR&Dathome，becauseofscaleeconomiesinR&D，proximitytothecompanyheadquarters，andmaintainingthesecrecyol’firms’technologies，tonameafewofthemainreasons．Yet，atrendofincreased“1lernationalizationoftheirR&Dactivitieshasbeenobservedovertime7Foalargeextent，overseasR&DbyMNCsisexplainedbytheneedtoadaptproductsmadprocessestoforeignmarkets．Recently，ithasbeensuggestedthatoverseasR&Disalsoundertakentogainaccesstoknowledgeinforeign”centersofexcellence”，andtobenefitfromlocalizedR&Dspillovers．j)TheNumberofMNCs’OverseasR&DFacilitiesareIncreasingR&Dinternationalizationemergedinlatel970s’andboostedattheendofl980s．ThenumberofNetherlandishandSwedishoverseaslabshadSurpassedthoseol’theirhomecountries．USMNCstripledtheirR＆Dinvestmentsduringl983tol993．Accordingthesurveyof，rb，‘tunetothetop500MNCs．morethan50percentofBritish，German、ItalianandSwedishMNCssetuplabsabroad．Meanwhile．thanhalfofthelabsthatlocatedinCanada、Italy、HollandandotherEuropeancountrieswereownedbyMNCsofothercountries．(Seefigure2-3)ii)TheRatioofMNCs’OutlaysonOverseasR&DtoTotalisIncreasing．Recently，increasingtheinvestmentstooverseasR&DfacilitieshasbecomeoneoftlremostimportantpartsofMNCs’globalizationstrategies．Forinstance，AmericanMNC’fnvestmentsonR&DincreasedfromUS$46billioninl986toUS$14．79 FnlhlCltilla—ACloseLookatSouthKorea’sFDlbillionsin1997，triplinginthevalue。Whileduringthesameperiod，theoutlaysofMNCsinUSonlydoubled+I'hegrowthrateoftheinvestmentonoverseasR&Dlacilitiesisthsterthanthatondomesticfacilities．Ill1997，tileinvestmentsofUSconlpaniesonovel’seasR&Dinstitutionsaccountfor10．5％ot’totalbyvalue．whilethisratioal’e9．7％and6．4％ill1990and1985．respectively．MNCsLocalizingTheirBusinessEithel’hopingtOmaximizeplofiisorwishingtoescapefromthehomecountries’regulations，moreandmoreMNCsarenowlocalizingtheirmanagement，production，andR&D．Forinstance，manytopMNCs，suchasIBM、Son}'、andPhilipshavebeentryingtofadethecolorsol’theirownnations．]．'heirmainpurposesaretomakefrilluseofglobalexcellences、teclmologies、andnatureresource，withoutnarrowideasofnationalitiesorregions．MNCssomehowabtmdonedtraditionalconservativeideasandintendtogrowasglobalopemtors．TheylocateproducinginthecountrywheretheycallFigure2-3Labsownedbytop500MNCsOwnershipR&ⅡfaeiIiliesi¨llOStcOuntriesOvfrsfasR＆DfacjIitiesUS／Canada31)3J26lJ．K5581E．U6498Europe(others)2840Japan960Australia40OlitercoUntriesl】0TotaI56l353Sour。CE：Peal’ceattdSingh(1992}GlobalizhtgReseatvhandDevelopmenU10 Part2(；IO|mlExl)all$iONofMuItillationaIComnaiiiesmaximizetimprofits；trytheirbesttoharmonizebusinessactivitieswithlocalcultureandcustoms；andthestandardsoftheirrecruitmentarenolongerrestrictedbynationalitiesbutonlydecidedbytalentForexample，theCEOofSwedishcmnpanyNescafeisaGermany，and5of10directorsarenotSwedish；the10seniormarketingdirectorscomefrom10differentcountries．Inordertobuildpositivebusinessimages，MNCsalsoactivelytakepartinthedonationsandpublicaffairsasobeyingthelawsandrulesoftilehostcountries．Forinstance，whenChinawassufferingfromtheunusualfloodin1998，manyMNCsinChina，includingIBM，Siemens、andEricssondonatedalotofmoneyandmaterialsforChinesepeople．TheTrendsoftileCorporationsAmongMNCs：MultinationalStrategicAllianceAstheworldcontinuestomovetowardall“emergingglobaleconomy”，multinationalcorporationswillincreasinglyneedtoformalliancesinallefforttooffsettheenormouscostsassociatedwithbeingtrulyglobalcompetitors．Forthisandotherreasons，strategicalliances，althoughbytheirverynaturedangerousundertakings，becomesincreasinglyimportanttoglobalMNCs．Inaglobalizingeconomy，alliancesareameanstoexpandinternationallymorerapidly．Alliancesmakeitpossibletoenternewmarketsusingthedistributionnetworksandthespecificknowledgeoflocalpartners．Thankstothecontributionsofthesepartners，lesseffortandtimehastobeputintolearninghowtosucceedinverydifferentlocalenvironments，thusallowingforsinmltaneousandfastelltryintonmltiplecountries．UScar—makingcompanyFordbuiltupanalliancewithJapancompanyMazdain1979，whichisthefirstmultinationalallianceintheworld．ThetrendsofallianceamongMNCsemergedattileendof1980s’whenMNCsbegantocooperatethroughsharingstocksorcombiningtheirR&D、producing、salesandafterservice FDIIflChi¨a—ACloseI，ookalSouthKnrea’sFDldepartments．Suchcooperationgraduallygotstabledandfinallybecamelong。termrelationshipsbetweenMNCs．Asacompetitioninstrument，multinationalstrategicallianceisnotonlybeneficialtothedevelopmentandcontrolofhightechnology，butalsohelpfulloincreasetheleveloftheMNCs’marginalprofits．UNCTADrel?arsto|hemastrails—nationalCOlporations(D,ICs2 Part3ForeignDirectInvestmentsinChinaisthebigwinnerin2003withFDIgrewtomorethan$50billion．Althoughmanufactuiinginvestmentsareleadingthatgrowth，importmltlegalandregulatnrychangesareallowingforFDItotheservicesscetorinChina，niladdeddriverforforeigninvestment，ChinahasgraduallyliberalizeditsFDIpolicyregimes，reducedrestrictionsandbarriersforFDI，andimprovedtheinvestmentenvironmentWithitspotentiallyhugeandfast—growingdomesticmarkets，relativelywell—educatedpopulationandlow—costlaborforces．ChinahasbecomeoneofthemostattractivedestinationsforFDIintheworldChina’SaccessiontotheWTOalsoacceleratesl：DIjnflowstoChina3lOverviewofFDIinChinaInthepast20yearstheChineseeconomyhasincreasinglybecomehighlyexport—oriented，andsincethenrid一1990sthecountryhasbeenthesecond-largestrecipientofFDlworldwide(aftertheUSA)In2002，Chinawasthelargestrecipient“FI)IjntheworldAccordingtenflicialChinesesources．bothcontractedandrealizedforeigndirectinvestmenthasbeenrisingsinceecononliereformbeganin19797rheearl)')'ears(197983)wereaperiodofllearningforthegoverrm]enl，followedin1984—85bysignificantexpansioninbothcontractedandrealizedFDI．sometimesattriple—digitratesHowever，expansiondidnotlastlongasforeigniuvestnrsquicklybecameunhappywiththedifficultyofobtainingimportedmaterialsandmachilmryaswellastheirinabilitytoselltothedomesticmarketContractedinvestmenttumbledby52percentin1986．AlthoughrealizedinvestmentcontinuedInincrease，itdidsoatamuchslowerrateForeigninvestorsrespondedfavorablytonewlawstoencourageforeigndirectinvestnlent(theProvisionsoftheStateCouncilOHtheEncouragementofForeignDirectInvestment)；FDIresumeditsStateCouncilontheEncouragementofForeignDirectInvestment)；FDIresumeditsincreasein1987 rarfjbore耙¨Directlmestmen(sfnChl,aPart3ForeignDirectInvestmentsinChinaistirebigwinnerin2003withFDIgrewtomorethan$50billion．Althoughmanufacturinginvestmentsareleadingthatgrowth，importantlegalandregulatorychangesareallowingforFDItotheservicessectorinChina，airaddeddriverforforeigninvestment．ChinahasgraduallyliberalizedilsFDIpolicyregimes，reducedrestrictionsandbarriersforFDI．andimprovedtheinvestmentenvironmentWithitspotentiallyhugeandfast—growingdomesticmarkets，relativelywell—educatedpopulationand10W—costIaborfoi’ces．ChinallasbecomeoneoftilemostattractivedestinationsforFDIintheworldChina’SaccessiontotheW110alsoacceleratesl?DIin门owstoChina3．1OverviewofFDlinChinaInthepast20yearstileChineseeconomyhasincreasinglybecomehighlyexport—oriented，andsincetilemid一1990sthecountryhasbeentilesecond—largestrecipientofFDlworldwide(aflel’tileUSA)In2002，ChinawasthelargestrecipientofFDIintheworld．AccordingtoofficialChinesesources，bothcontractedandrealizedforeigndirectinveshnenthasbeenrisingsinceeconomicreformbeganin1979．7Fireearlyyears(1979-83)wereaperiodoflearningforthegovernment，followedin1984—85bysignificantexpansioninbothcontractedandrealizedFDI，sometimesattriple-digitrates．However，expansiondidnotlastlongasforeigniuveslorsquicklybecameunhappywiththedifficultyofobtainingimportedmaterialsandmachineryaswellastheirinabilitytoselltothedomesticmarket．Contractedinvestmenttumbledby52percentin1986．Althoughrealizedinvestmentcontinuedtoincrease，itdidSOatanluchslowerrate．Foreigninvestorsrespondedfavorablytonewlawstoencourageforeigndirectinvestment(theProvisionsoftheStateCouncilOiltireEncouragenlentol、ForeignDirecthwestment)；FDIresumeditsincreaseinI987． FDlInChinil⋯AClosel。ookatSoothKorea’sFI)IIntheearly1990sforeigndirectinvestmenttookoffwithhugeincreasesincontractedFDIbetween1991and1993andinrealizedFDIayearlater．In199lcontractedinvestnlentincreased82percent．In1992contractedinvestmentincreasedalmostfourfoldwhilerealizedinvestlnentrosebymorethan150percent，withcontinuedstronggrowthill1993．1'heincreasesin1992and1993probablyresultedlromDengXiaoping’stoni’ofsontheJ‘nChinawhenhereaffirmedtheopen-doorpolicyandencouragedfastereconomicgrowthandreform．Theratesofgrowthcouldnotbesustained；1994witnessedtimbeginningofaretrenchmentincontractedFDI．Inboth1996and1997．contractedinvestmentdroppedmorethan20percentRealizedFDIcontinuedtoincreasein1995and1996，butata10percentrateofgrowth．By1998and1999bothcontractedandrealizedforeigndirectinvesUnentbecamequiteflat，partlybecauseoftheEastAsiancurrencycrisis．Despitetheslowdown，contractedandrealizeddirectinvestmentsin2003wereapproximatelytenandtwelvetilnestilelevelsof1991．WithClfina’silnpendingandthenactualentryintotheWTO，therehasbeenarushofforeigncapitalintotheChinesemarket．In2003，realizedforeigndirectinvestmentreached$5351billion．(figure3·1)Afundamentalreasonforthepreviousslowdownwastheunsustainablyhighratesofgrowthofforeigndirectinvestmentintheearly1990s．Thepacewassorapidthatexcesscapacitiesmighthavebuiltupincertainsectors，withaneedforacorrection，thatis，aperiodofslowergrowthSomeinvestorscomplainedaboutthecontinueddifficultyofdealingwithchangingrulesandregulationsgoverningFDI．Stillotherscriticizedthelevelofcorruption．ButthenegativefactorshadbeenpartoftheChineseinvestmentenvironnlelltforalongtime．Since1992discussionsbetweentheUnitedStatesandChinal'cgardingmarketaccessandChineseeffortstojointheWorldTradeOrganizationhaveledtosolnereliefinthatarea，diminishingovertime4 Palt3ForeignnirectIIIVe$|lUlelttsi¨Chi¨aTheEastAsiancurrencycrisis，whichbeganinThailandinmidyearl997，severelyaffecteddirectjnvestmenlinflowsintoChinafromtheEastAsiancountries，includingHongKong，whichhadbeenresponsibleformorethanhalfofallFDIinChina．1towever，withChinaintheWorldTl‘adeOrganization，thesituationhaschangeddramaticallyAsmentionedearlier，realizedforeigndirectinvestmentreached$53．51billionin2003．Despitetheprevious“correction，”Chinamanagedtoaccumulateatotalstockofrealizedforeigndirectinvestmentworthmorethan$446．3billionbytheendof2002．Thecumulativenumberofcontractscametomorethan423，720．FDIenterprisesemployedmorethan18millionpeople．31SourceofFDIinChinaThroughouttheperiodof1979-2000，HongKongSARhasalwaysbeenthemostimportantsourceofFDIinMainlandChina．Itcontributed48．50percentoftheiotalcumulativecontractualinvestulentand48．89percentofthetotalcumulativeactualinvestmentrespectively．OtherimportantsotlrcesofFDlincludetheU．S．，Japan，TaiwanprovinceandSingapore．’Fheyaccountedfor8．96percent，5．74percent，7,07percent．5．23percentofthetotalcunmlativecontractedinvestmentand8．62percent，7．98percent，7．51percent，488percentofthetotalcumulativerealizedinvestmentrespectively．EastAsianeCOllomiesdominateFDItoChina．Combinedtogether，theycontributedover65percentofbothtotalcumulativecontractedandrealizedinveslment．1．op10resourcecountriesandregionsthatinvestedinChinasomehowchangedslightly(calculatedbyrealizedinvestment)．Amongthetop10，HongKongandVirginIslandsstilloccupiedthefirsttwopositionsrespectively．TheinflowsfromJapanandKoreaboostedfast，increasing2062percentand65．04percentrespectively．1nfowsfromU．Sslumped22．53％，5 FDIIIIChina⋯ACloseLookatSouthKorea’sFDFigure3-1RealizedForeignInvestmentinChina【billiondollars)仫一19941995i9961997t09819992000200120022003Figure3-2ConlraeledaudRealizedInvestmentsinChinaYearProjectsContractedRealizedinvesgmentslnvestments(Billiondollars)(Billiondollars)1994475498268033767’J995371JJl9】2823752l199624556732764I726l9972I【J【JI5100445257)998J979952J02454631999169I84I22340，3192001I2234762380407l5200l2614069I9546．878200234I7l827685274320034108III507053505Resout‘cPjMO#stryofCommerce6 Parl3Foreil!nDirectInvestmentsinCbina200l20022003COUntry[Realizedlnv．1IIcteaseRatiollealizedincreaseRatioRealizedIncreaseRatioRegionInv．[nv．TotaI469781514l0052743125ll0053505I44l(10H．K167l7853566786I6843386I7一093308．1apan434849lI928419．36479455042062945Korea2I524443459272264451644896504839U．S4433l129465424223510．284199．22．58785Taiwall2982980636397l33257533377-149663lSingapore2144一l2945723379034432058．1I94385Germallyl21316522590928．2349I760857-7．651．6U．Kl052187962240896．1482170742．1719I39Figure3-4MODESOFFDIINCHINA(REALIZEDBASIS)，1986-2003(US$billion)YeArEJVCJVWFOJD1991230f527)U76(I751I4(260)oi7(387)19926lI(556)212(I93)252(2291025(227)1993l535(558)524(I90)6，5i【237)O．42(i50)1994I793(53I)7I2(2II)804(23．8)068(2o)1995190815081754【20I)1032(275)o59(i．57)19962075(4971911(I9．4)12．6i(3021026(O61)1997i950(43i1893“971i620(35．81034(075)199818．30(404)972【2I5)1650(366)018(0．39)1999I580(393)g23{20．4)i550(38，6)0．38(00I)20110I430(35I)660(162)i930(474)038(O9)200lI574(3357)62I(I325)2390(5093)05I(109)20021499(2842J506(959J3i70(60llJfJ27f052)2003I539(29071384(725)3338(6305)003《0,06)SOURCE：PRC．AsiaEcoltomicInformationandConsultancyLtd．200317 FDIInChina—ACloseLookatSoutllKorea’sNOTE：FigtO。esinpal。enthesesardpercentagesof‘HetotalrealizedFDl．EJVrefers10eqt@v]ointPellturg，C,IVW扣，SfOCOHD。actualjointveHnirff，WFO，’E扣J。StOwholly加}‘eign—mpnedentetp*‘i^e。and。}￡lje把t‘Sto}ointdevelopmentTop10resourcecountriesand】．igionsin2003arethefollowingsI_espectively(byrealizedinvestment)：HungKong(US$17．700billion)．VirginIslands(US$5780billion)，Japan(US$5．054billion)，Korea(US$4．489billion)，US(US$4．199billion)，Taiwanprovince(US$3．377billion)，Singapore(US$206million)，Samoa(US$986million)，CaymanIslands(US$866nfillion)，Germany(US$857million)3．1．2ModesofIiDI洒ChinaForeigndirectinvestmentcanoccurinseveralforms：Sine—foreignequityjointventure(EJV)，Sine—foreigncontractualjointventure(CJV)，whollyforeign—ownedenterprise(WFOE)，jointdevelopment(JD)，andforeign—fundedjoint—stocklimitedcompany，Sincethe1990stheshareofwhollyforeigninvestedenterprisesgraduallyincreased，andfurthermore，t11eforeigncontrolinjointventuresalsoincreased．From1998on．theshareol‘whollyforeign—ownedenterDisesincontractedinvestmentexceededthatofequityjointventures．By2000，t11erealizedinvestmentshareofwhollylbreign。ownedenterprisesalsoexceedcdthatofjointvent【lres．Altogether，contractedjointventuresandwhollyfol‘eign-ownedenterprisescontTibutednearly80percentofbothtotalcontractedandrealizedinvestment(MOFTEC，200U．In2003，Onarealizedbasis，wholly如feignownedentezprisewasthedominantmodeofinvestmentinChina．accountingformorethan63percentoftherealized18 Part3ForeignDirectInvestmentsinChinaIIIforeigndirectinvestment；onacontractedbasis，thewhollyforeign—ownedenterprisealsotooktheleadin2003．Thesharesofequityjointventta-eandthecontractualjointventurehavedeclined．Onacontractedbasis，equityjointventtlresaccountedfor22．2percentin2003，whileonarealizedbasis，itssharewas29．1percentinthesameyear．ThecontractualjointventuremodehasdeclinedevellmoreOnarealizedbasisitaccountedforonly7．3percentofthetotalFDlin2003，downfrom42percentin1986‘l'hewhollyforeign-ownedenterpriseincreasedfromanegligibleamountin1986tomorethan63percentin2003Onarealizedbasisitaccountedforalmost63．05percentofthetotalforeigndirectinvestmentin2003，significantlylargerthanthe29．07percentoftheequityjointventure．Itsshareoftotalforeigndirectinvestment，onbothacontractedandrealizedbasis，isexpectedtoincreasefurther。Jointdevelopmenthasbecomelessandlessimportant，withlessthan0．1percentofFDlin2003．Onacumulativebasis，nptotheyear2003，41．2perceutofrealizedFDlwasinequityjointventures，16．8percentincontractualjointventures，40．2percentinwhollyforeign—ownedenterprises，and1．4percentinjointdevelopment．3．1．3FDIDistributionsbyLocationTileregionaldistributionsofFDIi11Chinaareuneven．MostFDIiSlocatedIUtilesouthandcoastalareasdespiteetlbrtsbythegovernmenttodiversifythelocationsofforeigndirectinvestmentandlureFDIinlandandtowardthecentraland：westernregions．Approximately87percentofthecumulativeFDlwaslocatedinthecoastal(oreastern)regions，．10percentinthecentralregions，leavingtilewesternregionwithanegligibleshare，duriugtimperiodof1985tO2000．9 In2002，Guangdongreceivedtilelargestamountofrealizedforeigndirectinveshnent．AlthoughitcontinuedtobetilemostfavorabledestinationforFDI，itssharedeclinedfrom2847perCelltillI992—1996tO215percentin2002Timthreeregionswiththelnos[1breigndirectinvestment(Guangdong，Jiangsu，andSlaandong)accountedforahnosthalfoftotalrealizedforeigndirectinvestmentinChinathatyear．Moreover，thecombinedshareofthetoptell(ofapossiblethirty—one)recipientsofforeigndirectinvestnlentcameto86．5percent．In2002，morethan87percentofthetotalstockofrealizedFDlwasconcentratedintimeasternandsoutheasternpartofChinaItshouldbenotedthattileimportanceofSoutheastRelatedCoastal’SFDIcontributionhasbeendecreased；itsareaoccupied28．8％ofallFDIinChina．whichisfarbelowitsshareof39．53％during1992—1996．Bycontrast．tileinrportanceofChangjiangRiverDeltaAreainChina’SFDIhasincreased．During1992—1996，itsharedabout2385％of’totalFDJHowever．itsshareincreasedto332％in20023．1．4FDIDistributionsbySectorthepasttwodecades，thesectordistributionofFDIhaswitnessedimportantchanges．Intheearlyreformperiod，theinvestmentwasmainlyconcentratedonlabor-intensivemanufacturingindustry(1ightindustry)andrealestate．Fromthe1990s011，itrapidlyextendedtoalmosteveryfieldoftheeconomy．Secondarysectorshared7204％ofFDIintlowintoChinaduring1997—2002．Thesecondmostfavorableseclol’fi)rforeigninvestorsduringthesameperiodisthetertiarysectorwithashareol’26．27％ofFDl．Only1．68％ofFDlwasinvestedintheprimarysector．Among12industries，thelargestportionofFDlwenttonranufacturesector，whichtookupalmost63％oftotalrealizedFDIduring1997—2002．Thesecondfavorableindustryforforeigninvestorsisrealestatemanagementmakingup2n 12．02％ofChina’SFDI．Inaddition，socialservicealsoheld5．61％ofChina’sFDIduringtilesanleperiod．3．2Ad]ustmentofChina’SEconomicPoliciesonFDIafterEntryofWTOChinesegovernmentmadeaseriesofpoliciesinordertosupplytheneedsofncwsituationsaftertheaccessionto、、7TOaltheendof2001．ThesenewpoliciesmusthaveimportantimpactsOHfutureFDIactivitiesinChina．’lheAsianfinancialcrisisstagnatedChina’SFDI．ThecentralgovenunentthussignificantlystreamlinedtileFDIprojectapprovalproceduresbyabolishingin1998therequirementthatprojectsinexcessofU8530millionbesubjecttoareviewbythecentralgovernment。】hemosttlar-reachingFDIliberalizationwasthedecisionin1999—2001toaccedetothetermsoftheWorldTradeOrganization(WTO)．UndertheWTOaccessionterms，Chinawasobligatedtogeneralcommitmentsincludinganon—discriminatorytreatmentofforeignanddomesticenterprises，adherencetoWTOrulesonintellectualpropertyrights，andtheeliminationofvariousrequirementsonFDI，includingforeignexchangeandtradebalancing，technologytransfer，localingredient，andexportperformance．Chinawasalsoobligatedtoeliminateallimportquotasby2006andalltariffsoncomputers，semiconductors，andrelatedproductsby2005．Foreignenterpriseswouldbeallowedtoownupto50perccntoftileenterprisesinthetelecomandinsuranceindustries．Foreignimporterscouldowndomesticdistributionchannels，andforeignbankswouldbeabletoconductlocalcurrencybusinesswithChineseenterpriseswithin2yearsofaccession．21 FDIInChiI¨⋯ACh．seLookatSouthKarea’sFDlFigure3—5Sharesto‘I'ntalRealizedFD[byLocation(Percent)Atea1992一1996J999200(1201lI2002SoutheastrelateIIcoaslaI1951j8936j30288GuangdongFujian284728927-12552I5ll08H)l}848473ChangjiangRiverDella2385252276287332Shanghai8297078928IJiansu1219l5l58148193Zhejiang3383404758SOUR('E：PRC,Economich礤”mat(onandAgency2000b．2001b，PRC。AsiaEconomiche,rmationandConsultantTLtd．2002．PR(’．NationalBut。call∥Statistics2001，2002，2003I992—1996dntaSOtgl·ceChinaStat(st(calYew‘book{slateStatisticalBut‘call。SSB)TheanticipationofChina’saccessionintoWTOhasmadeChina’sincreasedramaticallysince1999．Chinabecamethe143rdmemberofWTOinDecember2001andChina’sreachedarecordhighofUSD54．74billioninthefollowingyearof2002whenChinabecamethelargestFDI·inflowcountryintheworld．3．2，1FurtherMarketOpening11hemarketopeningprinciplereflectedthecommitmentsofChinatoabolishnontariffbarriers，reducetar(ffs，andopenitsservicesectors．ThecutsinimporttaftffsthatChinahasofferedareverysubstantial，andresultinareductionintheweightedaveragetar(fffrom13．3percentin2001to6．8percentattheendoftileimplementationperiod．China’scomnlitmelltstoliberalizetradeinservicesareextremelylargerelativetothoseofahnostallothercountries，thoughtheyaremoreoftensubjecttoqualificationsorreservationsthanthoseofothercountries． Part3ForeignDireetInvestmenISinC11iHaFigure3-6TheSectorDistributionsofRealizedFDIinChinaIndustryAmountShareAiiiiilllalGrowthRat“％}ThePrhnarySector456，384I68Il(1Farming，Forestry，AnimalHusbandry，andFishery456，384I681．10TheSecondaryIndustry19．551．50l7204104MiningandQuarrying405，09214909lManufacturing16，985，7176259l06ElectricPower，Gas，andWaterProductionandSupplyl，476，740544092Construction683，9522520871he7l'ertiarySector7．129，49l262700’Iransporiation，Storage，Postal，Telecomlnnnicatlons768．5642830．89Wholesale&RetailTradeandCateringServices65077I24(I092RealEstateManagement3262．42II202l02SociaIServices1522，55556ll08tlealthCare，Sports．andSocialWelfareEducation，79，287029092CultureandArts，Radio，FilmandTelevision33，I26012087OtilerSectors812．767300l0lSourceChinaStatisticalYearbook(SlateStatisticafBureau，SSB)Meanwhile，Chinawillreceivemost-favored·nation(MFN)statusinvirtuallyallmarkets．HavingthisstatuswillfieeChinafromonerousone．sidedreviewprocedures，suchastheformerannualreviewoftheMFNintheUnitedStates，anditassuresinvestorsinChina’scxpttl‘tittdustriesthatforeignmarketswillbeavailabletothemOilacontinuingbasis．3．22Non—disc“millation"hegeneralprincipleofnofl—discriminalionrequiresWTOmembersCogiveequaltreatmenttocompetingsuppliers，andnottodiscriminatebetweendomestically23 FDIInf：hina⋯ACloseLookatSouIllKorea’sproducedandimportedgoodsorservicesintheirinternalmarkets．InChina’scase，theapplicationofthisgenel‘alprinciplehasim，olvedsomeadditionalconlmitments，includingeliminatingdualpricingsystems，phasingoutrestrictionsontrading，andintroducingmoreuniformadministrativearrangementsandjudicialreview．Theseagreementsareofcrucialimportancenotjustforthecentralauthoritiesbutalsoforthelowertiersofgovernment，whichareofteninvolvedininternaltradeandregulation-IheAgreementonTrade-RelatedInvestmentMeasuresstipulatesthatthereshouldnotbelocalingredient，foreignexchangerequirementforforeignenterprises，whileChinausedtolmvesuchdefinitestipulationsinrulesandregulations．BeingobligatedtothepromisesforentlYintoWq、0，ChinahastoeliminateallsuchrulesRecentlyChinahadcanceledlotsofdualpl‘icesontrafficticketsandticketstoparksforforeigners．ChinaalsoeliminatedthediscriminationinquotadistributiontowhollyforeignownedcompaniesaftertheentryintoWTO．3．2．3‘l'ransparencyandPredictabilityAftertheentryintoWTO，ChinalllnS[regularlypublishgeneralWTOrulesinofficialjournalswithrelevantinformationincludingtheresponsiblegovernmententityandtheeffectivedateofthemeasure．Inaddition，Chinacreatesinquirypoints，whichoperateson30dayresponsetimes，topermitcompaniestoobtai、ninformationabouttheselawsandregulations．Furthermore，ChinaalsoprovidesnoticeofIawsandregulations，allowingreasonabletimeforcomment，priortoimplementationorellforcementUndertheconnnitmentofentryintoWT0，ChinaImvetoapply，implementandadministerallofitslawsandregulationsrelatingtotradeingoodsandservicesinauniformandimpartialmannerthroughoutChina，includingspecialeconomicareas．24 Part3ForeignDirectInvestmentsinChina!!!!I—I————————————————————————————————；；I—ll!!!!!曼!!!!!量自!!!!!!!|!!目!!!!!!!!!E邕!曼ChinahadrevisedtherulesandregulationsthatdonotaccordwiththeWTOrules．Untiltheendof2002，theStateDepartmenthadamended2300economicregulationsmanyofwhicharerelatedwithinvestmentLotsoflocaladministratorsalsohadrevisedtheirrulesandregulationstoconsistwiththecountrylaws，WTOrulesandChina’scommitments．3．2．4IntellectualPropertyRightsWithChina’sentryintotheW’FOin2001，IPisalsobecomingallincreasinglyimportanttopic．Sofar，nmchpublicattentioninChinahasfocusedonIPinthecontextot’counterfeittrademallkgoods，piratedsoftwareandmovies．However，infutureonecanexpectthediscussiontofurthershiftfromconsumergoodstohighervalueaddedgoodssuchasadvancedtechnologyTechnologytransfersinChinaaloneconstitutedcloseafifthin2001．ThisisalsoreflectedintheChinesegovernment’sofficialpolicytoencouragetheintroductionofadvancednewteclmologiestolaythelbundationforaknowledge—basedeconomy．ForChinatheAgreementonTrade—relatedIntellectualPropertyRights(TRIPS)isakeyaspectofW‘FOaccession．Chinahasstreugthoneditsintellectualpropertyrightsregime，recognizingtheneedtostimulateinnovationdomesticallyandaccessforeigntechnology，andalsorespondingtopressurefromitstradingpartners．InlinewiththeWTOagreement，ChinesepatentlawswereamendedslowlycominginlinewiththemultilateralTRIPS(，11radeRelatedAspectsofIntellectualPropertyRights)agreement．ChinaalsoimplementednewRegulationsfortheAdministrationofTechnologyImportofTechnologiesunderthemanagementoftheMinistryofForeignTradeandEconomicCooperation(MOFTEC)．Thenewrulescoverpatenttransfers，patentapplicationrights，patentlicenses，tradesecrets，25 FDIIIlChina—ACIoseLookatSouthKo['ea’sI?DItechnicalserviceprovisions，andothcrlbrmsoftechnologytransfer．Inparallel，ChinesecourtshavealsobeenstrengthenedwiththeestablishmentoflPspecialcourtsandtiretrainingofjudges．7l'hisreplesemsaninitialsteptowardsbridgingthegapbetweentheexistinglegalframeworkandalleffectiveenforcementregimetoexecntethelawsinday·to—daybusiness．3．3TrendsofFDIinChinaTheenthusiasmol’internationalcapilalinflowwillheightenagain．WiththerecessionofAmericanandglobaleconomy，China’sbroadmarketandsmoothdevelopmentwillbeagreatattractiontotheinternationalcapital．1'hedirectinvestnlenttakesdivelsitiedformsWithChina’sentryintotheW—10，somedomesticlistedcompaniesandsonlegroupcorporationsthatownlistedcompaniesbecometheobjectsofmultinationalacquisitions．ThiseffectivelypromotestiledevelopmentofthedomesticsecuritiesmarketandprovidesnewenergyfordomesticcapitalmarketInternationalcapitalinflowfocusesonserviceindustries．Serviceindustrieswith．10werlevelofopen—upbecometirekeytieldforforeigninvestment．InordertofulfillitsconnnitlnenttotheWTO，Chinagl‘aduallyopensitsinsurance，transportation，andtourisnrmarket．Fromthechangesofforeignborrowinginrecentyears．thecapitalinflowinmenatureofforeigndebtisdecreasingandthebalanceamountisalsodecreasing．WiththeentryintotheWTO，merchandisetradegrowsgreatlywiththerapidgrowthofimport．Tilelinancingthroughdeferredgatheringoftradeisexpectedtobemoreactive，whichmayincreasetheforeignexchangepaymentofimport，aswellasprovidefinancingconvenienceofutilizingforeigninvestmentforthedevelopment Parl3ForeignDireetlIIvestraenIsinChinaofmerchandisetradeinChina．whichnlakesitpossiblel’orChina’sforeigntradetogrowrapidlyandonalargcrscaleinthefuture3．3．1FDIoilR&DisGrowingMNCsnomaroundtheworldareestablishinggrowingnumbersofR&Dcenters，programs，andlabsinChina．Overtime，foreigninvestorsinChinamarketandelsewheremustupgradetheirproductlinesinordertokeepaheadofthemarketandremaincompetitive；theproductsthecompanyfirstenteredthemarkettosellhavesincebecomeoutdated．Moreover，asmultinationalscontinuetospreadtheirbusinessesacrosstheglobe，COl+poratesubsidiariesareexpectedtobecomemoreself-sustainingandtocontributenloresubstantiallytothecompany’sglobalenterprise--notonlyinterulsofrevenuebutalsobycontributinginnovatively．ItisattiffsstagethatforeignR&Dcentersexpandorareconsolidatedtoallownloreadvancedonsiteresearchanddevelopmentwork；thisiswhatwearenowbeginningtoseejnChjna．Drivenbyincreasingeconomicpressuresonhigh-techindustryandthegrowingglobalcompetitionforinternationalR&D，manyforeigninvestorsinChinaarenowconsolidatingtheiroverallnumberofresearch—relatedprogramswhilesilnultaneouslyshiftingtowardmoreadvancedR&Dactivities．DuetorecentW，10．relatedreforms．foreignhigh-techenterprisesareallowedinmanycasestoestablishwhollyforeign．ownedsubsidiariesinChina，whicharemoreattractivethanjointventuresforconductingR&D．AccordingtoareportreleasedbyUSITBusinessCommercialAssociation，atpresentalotofUShigh—techbusinesshopetoproducetheirhigh—techproductsinChina．In2002，manyMNCs，includingPhillips、Sanyo、Sony、SamsungandLG，announcedthattheywillbuildtheirR&DcenterinChina．Theestablishmentof27 FDIf¨Chifl?4⋯ACloseLookntSouthKorea’sFDJtheseR&DcentersisdesignedforbothChinaandthewholeworldmarket3．3，2M&AActivitiesareBoostingChina，whosenascentmarketprovidesabrightspotonanotherwisedullhorizonformergersandacquisitions．Whileglobalacquisitionactivityhasdroppedsunle40％sinceearly2002，M&AactivityinChinahasdoubled．During2002，Chinesecorporationsparticipatedindealstotaling$27．8billion，accountingforone-quarterofAsia’sM&Aactivity．The$1．8billionvalueofacquisitionsbyChinesecompanies～whilemuchs111aller——representsa24％year-to-yearincreaseChinesebuyersviewacquisitionsasapathtobecomingcompetitiveglobalpowerhousesAfteralullin2003duetotheimpactot’SevereAcuteRespiratorySyndrome【Sats)，mergerandacquisitionactivity(M&A)inChinahasbeenonarollthisyearAccordingtodatacompiledbyM&AAsia，M&AactivityinChinawasup55percentinthefirstquarteroftheyear，comparedwiththesameperiodin2003，Invalueterms．thattranslatesintoabriskUS$8．7billion．1ransactionsarebeingdrivennotonlybyChina’sboomingeconomy，butalsobytheChinesegovernment’sdesiretoprivatizemanystateownedenterprises(SOEs)andtheunendingwaveofforeigninvestorshopingtoclaimastakeinthecountry’svastmanul'acttaingandmarketpotential．Dependingontheinvestor’scompetitiveneeds，dealscallrangfromstrategicminoritystakestooutrightacquisitions．11hemostactivesectorsforM&Aactivityremain，asin2002and2003，energy，utilities，mining；financialservices；andtelecommunications．RecentbignamedealsincludeParis—basedcosmeticcompanyL’OrealSA’s28 purchaseofaChineseskincarecompanyandGilletteCo’ScontrollingstakeinrivalbatterymakerVujianNanjingNanfuBatteryCoItisexpectedthatM&AdealvaluesinChinatobe30-50percenthigherthisyearthanin2003．3．3．3FDIinServiceSectorChinesegovernmentisurgedtObetteldeveloplocalservicesectorbygraduallyopeningfieldssuchasforeigntrade，tourism，bankingandinsuranceafterenteringintoWTO，whichisalsoagoodchoicetOtacklethemoreandmoreimportantanemploynlentproblem．ServicesectorisbecomingthenewhotspotofFDl．Last3,ear，onlyinBeijingcity，thenunlberoftheapprovedovel’seafirillSinservicesectoris737，attracting3．282billionUSdollars，thatoccupieslllorethan70％ofthetotalFDI．Ingeneral，thereexistabundantprofitroomintraditionalofficiallymonopolizedsectors，becauseofthelong·termlackofcompetition．BeingobligatedfromthepromiseslbrtimaccessiontoW'110，Chinahavetograduallypullflaeplugontheentrylimitationsonfinanceandinsurance、teleconmmnications，transportationsector，broadentheownershiprestrictionstoservicesectors，andremovetilelimitsintheFDIprocess．Ontheotherhand，manufacturingaccountedtwo—thirdsofpresenttotalamountofFDIinChina，whileservicesectoronlytookup20percent，whichisfarfromtireaveragegloballevel(thatis50percent)．Boththeimprovementofoperatingenvironmentandthepotentialdevelopmentcapabilitymustleadtoallevenmorebrilliantfuturetbrservicesector．Untiltileendof2001，therewere214foreignbanksagenciesand190operateinstitutionsinChina．ThetotalcapitalvalueofforeignbanksinChinareachedUS$45．2billion，theloanamountU8514billion，and31foreignbankswereallowedtosetuptheirRMBexperimentalinstitutions．TheestablishmentofShanghaiXintianconlmunicationCO．annouocedthebirthof／hefirstSino—foreignjoint2q FI)lIliChilift—ACloseLookatSouthKorea’SFDItelecommunicationconrpany．Andalargenmnberofforeigncompanieshasinvestedinorwishtoinsurance，media，andstockservice，travelagencyandpublicservicesectors．(InteJnatio，talFinattceSep10■2002)TheinvestmentinservicesectorincreasedsteadilyandtheamountstayedatUS$10billionorsothisyear．TileamountofFDIillservicesectoraccountedfor22percentoftotalFDIvaluerecentyearsaf'terthepeak2747percentinl999．Incourseofdistributions，sincetherearerelativelylesslegislateinvestmentlimitationsonthem，estatebusiness、socialservices、restaurants、transportationbusiness、storagesandtelecommunicationsarethemainservicesectorsattractingFDI，contributedmorethan90percentoftotalvalue．Incontrasttothis，FDIonfinance、wholesales、retails，education、artandbroadcastonlyrepresented0．3percentto0．7percentoftheiotalanloanl．3．4MNCS’InvestmentsinPost—WTOChinaGlobally，thecorporateworldisbecomingincreasinglyintertwined．TheMNCisbothavehicleforgeneratingFDIaswellasaproductofit．ThistrendtowardsMNC—basedforeigninvestmentislikelytocontinueasaresultoftheglobalizationofmarketsforgoods，services，andcapital．Infact，muchglobalizationisdrivenbyMNCsUptonow，anlongtheglobal500giantsalmost400havealreadymadetheirinvestnrentillChinawiththennnlberofprojectscomingtoover2，000intotal，andmorethan100researchcenters，ot’whichnearly40areofanoticeablescale．Let’Shavealookatsomeexamples：I"FileMotorolaInc．hasinvestedinChinaforsevenyearsandasreporteduptolastAugustit'sinvestmentinChinahadamountedtoRenminbi(RMB)28．5billion．RecentlyitannouncedinBeijingthatwouldincrease Part3ForeignDjrectInvestmentsinChinaitsiotalinvestn]entjnChinato10billionU．S．dollarsbytheyear20062．EricssonChinapresidentJanMaltosaidthatEricsson’sinvestmenti11Chinawillreach5．1billionUSdollarsbytheendof2005，doublingthefigureatpresent3．PhilipswillbuildaUS$1billion，3，500一employeeintegratedcircuitOc)assemblyandtestingplantintheeasternChinacityof、Suzhou，50miles(80km)fromShanghai．4．SiemensllasSOIhinvestedover1billionGernlanmarksinChinaandtirevolumeofinvestnlentwillcontinuetogrow．5Microsoftannouncedthatatotalinvestmentof40millionUSdollarsoverthenextfewyearswillbeusedtoexpanditsAsianRegionalEngineeringCenterinShanghaianditwillinvest$750millioninChinesesoftwarecompaniesandlearninginstitutionsoverthenextthreeyears．6．Nokia’sinvestmentinChinahassurpassedUSD17billion．Nokiahasestablishedovertwentyoffices，eightjointventuresandoneR&Dcenter，withover5，500employeesinChina．7．ThetotalinvestmentofCoca—ColasystemhasreachedUS$800ill川i011⋯·一AfterChina’saccessiontotheWTO，foreigninvestorshavebeenrealigningtheirbusinessesinChinawhileexpandingtheirinvestmentsoastoadaptthemselvestoamoreopenpost．WTOChinaandfiercerglobalcompetition．3．4．1AcceleratingInvestmentBelievingthatChinahasabrighterfutureandhugegrowthpotentialaftertheentryintoW’1"O，alargenumberofMNCshaveacceleratedtheirlargeinves'anentinC’hina．．Accordingtostatistic，400outofthe。。FORTUNE500”havemadeadirectinvestmentinover2000projectsinChina．InPudong，Shanghaialone，thetotalvalueofl81projectsinvestedby98companieshasreachedU．S．$8billion．Volkswagen’sAsiaPacificLtdannouncedinShanghaithatinthenexttburyearsVolkswagenwouldinvest600millioneuroayearinChinainmarketingnew31 FDllnChilla⋯ACloseLookatSouthKorea’sFDIproductsanddevelopingnewtechnologies3．4，2MoreRegionalIteadqualtersAsmultinationalcorporationsaccelel’atetheirinvestmentinChina，anincreasingnumberofMNCsarealsomovingtheirregionalheadquarterstoChinatocoordinaletheirbusinessesinChinawiththoseinnearbycountriesandregions．OftZbrtune500corporations，11havesetupregionalheadquartersinBeijingand25inShanghai．Sofar．Alcatel，HSBC，CitiBankandMckinseyhavesetuptheirregionalcentersinShanghaiwhileMotorolachose垦￡ningasitsregionalbase．ArecentFortunesurveyshowsover92percentofnmltinationalcorporationswillconsidersettingupregionalheadquarlersinChinainthefuture．Forinstance，AlcatelhassetuparegionalheadquarterinChinatohelpmanagethedemandsoflocalcustomers．1'heAlcatelAsia—PacificheadquartersatPudonginShanghaiisalsoresponsiblef’orcoordinatingthecompany’soperationsin16Asia—Pacificcountriesandregions，aswellasmanaging22China—basedinvestmentbusinessesandR&Dcenters．Others1ikeHSBC，CitibankandMckinseyhavealsosetuptheirregionalcentresinShanghai．whileMotorolachoseBeijingasitsregionalbase．3．4．3EsIablishmentofR&DInstitutionsInordertoensurethattheirproductskeepupwiththechangingmarket，multinationalcompanieslayinorcemphasisonthelocalizationofR&D．Somepowerfulcompanieshaveincreasedtheirlt＆DinvestmentandestablishedresearchinstitutesinChina．Attheendoflastyear，MicrosoftinvestedU．S，$80millioninaChinaResearchInstitutespecializinginessentialresearch．ItalsodeclaredrecentlythatU，S，$5032 Parl3ForeignDirectInvestmentsi11ChinamillioninvestmentwouldbemadeintheMicrosoftAsian‘l'echnologyCenterinShanghai，thehighest—levelresearchinstituteofMicrosoftinChina．NorthernTelecmnInternationalLtd，IBM、Intel，DuPontHoldingCo．，Ltd．，P&G，Ericsson，Nokia，PanasonicandMitsubishihaveallestablishedresearchcenters，technologicaldevelopmentcentersandlaboratoriesinChina．A7I&Tevenplanstoopenthefirst”BellLab”．AFrenchcompanywillbuild”technologicalzones’。inBeijingandShanghai，includingachipfactoryandfourapplicationlabs．1TindustrywatchersalsopredictthatthenulnberofChina—basedR&Dcentersfornmltinationalcompaniesal'elikelytodoublewithinfiveyears．WithforeigncorporationsintroducingmoretechnologiesorhavestartedtodevelopChinaasahotbedol’newproductsandtechnologies．Chinaismakingitsmarkasanewtechnologyhub．34ServicesectorChina’sWTOaccessionwilleliminatemostofthecurrentrestrictionsonforeigninvestmentinitsservicesectorwithinfiveyears．AccordingtoChina’sWTOcommitment，foreigninvestorsareallowedtoparticipateintheservicesector，includingfinancing，insurance，commerce，telecommunications，transportandtechnologicalservices．SincethoscdomesticcompaniesinIheselieldsmostlyhavelowinterlmtionalcompetitiveness，theywillnaturallyjoinwithmultinationalgiantstosurvivetheglobalcontest．Ontheotherhand，governmentisalsolikelytoencourageforeigninvestorstoentertheservicesector，becauseitcanhelpabsorbthecountry’sredundantlaborlbrces．AlsowiththepushingofChina’saccessiontoWTO，alargenumberofMNCsbegantotuintheireyestoChina’sservicesector，whichwasusedtobercgardedasataboo．33 FDIInChhla—ACloseLookatSouthKorealSIn2001，atotalol’5,21210l‘eign—investedcompanieswereestablishedwithintileserviceindustrywithactualforeigninvestnlentreaching11．411billion1JSdollars，about24．35percentoftilecountry。Stotal．France—basedCarrefourselected34Chinesecompaniesspecializinginproducinggeneralmerchandiseanddailynecessitiesasitsglobalpartners．TheOBlCompany，aworldwideretailerspecializinginhomebuildingmaterials，signedsupplyagreementswithfiveChinesenlanufacturersanddecidedthatitsnewshopsinRussiawouldpurchaseallgoodsfromChina3．4．5StrategicShiftingInvestmentdomainsofMNCstransferlromlabor—intensive1ndustriestofund—andteclmology-intensiveindustriesdu；。ingtilesequentialprocedure，whichindicatesthatdyadicstrategicmotivationsevolveovertime．MNCsintheearlyinvestmentperiodenterChinatocapturecheaperlaborandabundantresources，thenturntomakebiggerprofitinthelongruninthesequentialprocess．Thisshiftfrominvest,nentingeneralsectorstOstrategicsectorsimpliesthedeclineofentrybarriers．Ontheotherhand，thehostcountryopensitsmarkettopursuemorefinancialandadvancedtechnologiessequentially Parl4KoFeallFDIiilChinaPart4SouthKoreanFDIi11ChinaJ。hereestablishmentin1992offormaldiplomaticrelationsbetweenSouthKoreaandChina--relationsbetweenthetwocountrieshadceasedduringtheColdWar—hasledtoasurprisinglyrapidgrowthofbilateraleconomicexchanges．In2001，ChinabecameKorea’ssecond-largestexportdestination，overtakingJapan；andChinawasthesecond—largestdestinationforKorea’sforeigndirectinvestment(FDI)outflows．Twoyearslater，in2003，ChinaovertooktheUnitedStatesasKorea’sprimaryexportdestination，andChinaalsobecametheprimarydestinationforKorea’sFDIoutflowsAccordingtoaKoreaInternationalTradeAssociationreport，KoreanFDItoChinahasrisenmorethanthreefoldbetween1999and2003．KoreahasnowsurpassedtheUSandTaiwanasChina’sthirdlargestsourceofFDI．1radeandeconomicexchangesbetweenthetwocountrieshavealwaysbeenthehighlightinChina—ROKrelations．Since1992，thetradevaluebetweenChinaandROKhasbeengrowingattherateof25percentannually．Withtradevaluein2002toppingUS$44billion，eachhasbecomethethirdlargesttradingpartneroftheother．TheROKlsinvestmentinthenationhassofarsurpassedUS$15billion．FromJanuarytoMaythisyear，thetradevaluehadreachedUS$22．7billion，anincreaseby44．5percentcomparedwiththesameperiodoflastyear．4．1BackgroundsandMotivesofKoreanFDIinChinaAfterthemidof1980s’，Koreaboostedexportsinvirtueoflowcurrencyrate，interestrateandoilprice．However，boththedevaluationofKoreancunencyandtheincreasingsalariesattheendof1980s’weakenedKoreancompanies’competitivecapability．Recently，beingchallengedbytheseriouscompetitionfromChinaand FUII¨('hinll⋯ACloseLookatSouthKotea’sFI)1otherAsiancountries，Koteahadtoputmoreeffortstomakesurenotlosetheirsupra’iol’positioninthecompetitions41l7fheNormalizationoftheSino·KoreaRelationshipTheexpansionofKoreanFDIinChinahasbeenaccompaniedbyandinmanycasesfacilitatedbythenormalizationandaccelerationofSino—Koreapoliticalanddiplomaticrelations．Besidesthegrowinggovernmentalexchanges，contactbetweenthetwopopulationshasbeenexpandingaswell．IntheprocessoftheFDIdevelopment，usuallyinvestmentisprotectedbyrulesandregulations．Beforethelegalprotectionsaleimplemented，otherfactorsbeyondeconomyplaysanimportantroleIilthecaseofSino—Korea，theredideverexistsomeotherelementsaffectingtheFDIbetweenthetwocountries．ItisimpossibletoattractJotKoreanenterprisestoinvestinChinabeforetherelationshipnormalization．InthecourseofdevelopmentofFDIbetweenthesetwocountries，therewerefeWKoreaninvestmentsinChinabelbreKoreanBankpermittinginvestmentinChina．Suchsituationhadnotchangeduntil1992whenChinaandKoreafinallyrealizedrelationshipnormalization．China’Ssuccessinreformingandopeningpolicies，alongwiththesigningoftheprotectivetreatiesfortradeandinvestmentbetweenthetwocountries，thesizeofSino—Koreatradeboostedsignificantly．TradeexpansioninturnacceleratedFDIThegianttidalwaveofKoreanFI)IinChinasurgedafterthetwogovernments’solvingmanyproblemsbeyondeconolny．Thegovernmentandbusinesscommunities，workingtogethersincethelate1990s，havealsoincreasedopportunitiesforKoreanfirmsinChina．"lllegovernmentlbrmedwithChinatheCooperativePartnershipforthe21stCenturyin1998，andministersfrombothgovernmentsmeetregularlytoexpandcooperationinareassuch36 Part4KoreanFDI．nChinaasinformationtechnologyThegovernmentandbusinesscommunitieshavecreatedjointstrategiesfordoingbusinessinChinaandhaveincreasedt11enumberofexchangesandtradefairsthere41．27l'hehnprovementoftheInvestmentEnvironmentofChinaFrom1979，Chinahasdevotedarduouseffortsinearningstrictconfidencefromforeigninvestorsduetothei、01_egonesocialistplanningecononlicsystem．ChinaenteredWTObegananeweraforChina’sFDIinflow．AccordingtotheevaluationreportcompletedbythecooperationofNationalBureauol、StatisticsofChinaandWol‘ldBankGroup．basedonasurveyto1500enterprisesalBcijing，Shanghai，’I'ianjing，Chengdu，andGuangzhou，‘‘developingcountriesmergedintotheglobalizationrunswell，amongthem，theachievementofChinaisespeciallyprominent，andisundoubtedlyleader．’’4．1．3MotivesofKoreauInvestmentinChinaApollbytheKoreaChamberofCommerceandIndustry(KCCI)of213Seoul-basedmanufacturingcompaniesshowed，regardingreasonsforrelocation，35．6％citedcost-cutting，comparedwithlaborshortage(27．1％)，overseasmarketexploitation(15．8％)，thesecuringofrawmaterials(76％)andstrategicallianceswithforeigners(5．1％)．7fhatis，themotivationstoinvestinChinaarenotverydifferentfromthoseintheSoutheastAsiancountriesorotherareasintheworld．ThemajorreasonsfortheinvestmentinChinacanbesummedupasfollows：DomesticEconomicConditionsIncreasesi11wonvalue37 FDIInChma⋯ACloseI．ookatSouthKorea’sWageincreasesTradebarriersfromimportingnations(importquotas)Decliningindustry(e．g．，sewingandclothing，stuffedtoys，bottles)AttractionsinChinaLong—ternrstrategyinconsideJ【JationofthesizeofthepotentialmarketinChina(e．g．，autoindustriesandotho+s)．Lowfactorcost(wages，rawmaterials，industrialsitecost)．Nolaborunionproblems．Dexterityandskill，Establishingabasepriortothecompetingfilins(orcountries)InvestmentdjversjficationAfter1990．wagesinKoreanmanufacturingroseatallannualaveragerateof11％一Koreahasbecomeahighwageeconomy．Korea’swagelevelsaretentimesthoseofChinanowadays，andarealsoratherhighcomparedtocountrieslikeSingapore，HongKongandTaiwanthataresimilartoKoreaintermsofthestageofeconomicdevelopment．ThewagelevelofKoreaisnne—thirdsorhalfofthatinJapan，but6to7timesofThailand，and10timesofChina，whichmakeitlosethesuperiorpositiontolocateIabor—jnlensjveseclorsThepricelevelofKoreakeepsonrising，whichhadbroughttheincreasingoffactorcostandlaborcost．Theretbre，Koreahadlostitscompetitivecapabilityonpriceaspect．ManyKoreanenterpriseshavetorelocatetheirbusinessinothercountrieswithlow-wagelaborresource．．Thenitisnotstrangethatmanyol’themchooseChinaasthedestinationofcapital，whohassufficientlow—wagelabors，richmaterialresourceandlmgedemands Part4Kor粕lnFDIinCItinnChina’SnaturalattractivenessforlnvestmenIhasbeenaccentuatedforKoreanfirmsbyChina’Srelativelycloseproximityandtileexistenceofaready—madeworkforceintheformofKorean·speakingethnicminoritiesinChina．Ofcourse，KoreanfirmsprimarilywanttoinvestinlocalproductiontotakeadvantageoflaborcostsandpositionearlyfornamerecognitionandmarketshareintherapidlyincreasingChinesedomesticmarket．Intiffsregard，KoreanfirmshavebeenremarkablysuccessfolatridingtileChinese“wave．”4．2Overview111I992．KoreaandChinaestablishedofficialdiplomaticrelations，andtheysubsequentlysignedallinvcstnlenIprotectiontreaty．Inthe1992—96period，KoreanFDIinChinaincreasedremarkably(seefigure4-1)After1994；Chinabecamethesecondmostattractivedestination，aftertheUnitedStates，foroverseasinvestmentsofKoreancompanies．KoreanFDIoutflowsinChinareachedapeakin1996，butinvestmentfevertowardChinasubsidedsignificantlyafter1997becauseofthedevastatingfinancialcrisisinKorea．In1997—99，theannualamountofactualFDIcontinuedtofall，whichprobablyreflectsthefactthatalargenumberofKoreanfirmssufferedfromadeficiencyoffundscausedbythefinancialcrisis．Theysimplydidnotpossesstilefinancialcapabilityofdoingbusinessactively1inChina．Korea’ScunmlativeinveslmentinChinareachedUS$5．46billionattheendof2001，accountingfor16％ofKorea’Stotallbreigninvestment．In2002，Korea’Sinvestmenti17ChinarosetoUS$801million，up48％fromtheyearbefore．ThereisnofortnalestimateoftilenumberofKoreancompaniesoperatinginChina．AccordingtotheKoreanHerald，some10，000KoreancompaniesarenowoperatinginChina．In2003．thenumberofKoreanFDIprojectsinChinaaccountedfor597percentofthetotalnumberofKoreanforeigninvestmentsinthesameperiod；andtheamountofKoreanFDIjOChinaaccountedfor37．1percentofKorea’StotalFDI FDlIIiChimI_一A(1IUSeIJ00katSouthKorea’sonanarrivaIbasis．Attheendof2003、thetotaIcumulativenumberofKoreanFDIpJ’ojeclsinChinawas9，075，andtilecumulativebalancewas$7．98billiononallarrivalbasis．’l'hetotalnumbellofprojectsinChinaaccountedfor46．0percentofthetotalnumberofKoreantbreigninvestments，andthecumulativebalanceaccountsfor18．0percent011anarrivalbasis．Thisproliferationofinvestmentisasign01"growingeconomicinterdeDendence．Figure4-1TheFlowofKorea’sForeignDirectInvestmentintoChina，1988-2003FlowofcontractedFDIFlowofactuaIFDINumberofprctjectsAiTiolInt{$()()(J)NumberolprojectsAJnotmt($000)198823、400ifO1989129、77076，360199039556242416．174199l112847226942，4691992269223．1I3170141，1271993631622．70l38l263．68219941，065824．85884l633．0841995885l28230075l84I．1221996925l95362573390I，210199775f9J4．318630725，6831998317895，84l263677．9501999552482，264457348691200090593I．699766612．958200II，123981．97Il，028576．8452002I，5122，015808I，331891．60120031，7572．557．50I1，6231．304．997Accumulated10-85713，839，5I59，0757，983，963balanceSource。Ex印't-lmpol。tBankqKotcu．ww．'．koreaexim．go．kr／web／eng／index．)p Part4KorennFDIinCllina4．2．1RegionalDistributtonofKorean]nvestnlentOnegeneralobservationaboutKoreanFDIinChinaisthatKoreaninvestmentstendtobeclusteredinseveralcoastalregionsinChinabecausetheseplacesprovideainorefavorablebusinessenvironment(includinginfrastructures)forKoreanconlpanies．GuangdongProvinceaccountedfor4％ofKorea’StotalinvestmentinChinafrom1996—2002，comparedwith26％forShandongProvinceand28％fortheYangtzeRiverDeltaregion(Shanghai，JiangsuProvince，ZhejiangProvince)．Shandongprovinceisthemostpopulm’place；itaccountsformorethan30percentufKoreanprojectsandabout25percentoftotalKoreaninvestmentinChina．Theabundanceofskilledlabor，Jnvcslment-promotingpoliciesfromtheprovincialgovernment，andethnicconnectionsinthisareaarecrucialforattractingKoreanFDI．ShandongisfollowedbyTianjin，Jiangsu，Liaoning，andShanghaiintermsofamountofinvestment．Thus，thelocationsofKoreaninvestmentsaredifferentfromoverseasChinese，whomainlyconcentratetheirinvestmentsinGuangdong，Fujian，andtheYangtzeRiverdeltaareaaroundShanghai．Inmorerecentyears，however，Koreaninvestmentinthenortheasthasdeclined，whiletheYRDregion(Shanghai，Jiangsu，Zhejiang)hasgainedinpopularity．In2002，almost30％ofallKoreaninvestment'～enttotheYRDregion，aheadoftheBeijing—TianjinregionandShandong．GuangdongProvincetypicallyreceived1—4％ofKorea'sannualinvestmentinChina．Althoughstartingfromalowbase，theincreaseinKorea’SinvestmentinGuangdongwasquitesignificantin2002．4 42SectorDistribulionotlKorenHInvestmentReflectingtheoverallpictureofKoreaninvestmentinChina，KoreancompaniesaleheavilygearedtowardsmanufacturingandIradiugCumulatively，84％oftiletotalKoreanFI)IinChina'wasintilelnanulilcturingsect(IrTextilesmidapparelwasthelargestsub-sector(16％ofcumulatedtotalinYestuael'，tinChina)，1"ollowedbyelectricandcomnmnicationdevices(14％)，petrochemicals(13％)，machinesandequipment(10％)andtransportequipment(10％)．KoreanFDItoChinahasbeenbiasedtowardthemanolacturingsectorLsee09u}c4一j)Asol’November2003．873percentofKorea’SFI)IinChinawasinvestedintilemanufacturingsector．Withinthemanufacturingsector，thetopfoursubsectorswereelectronicsandteleconmmnicationsequipment，textilesandapparel、petroleumandchemicalproducts，andmachineryandequipmentFigure4-2KnremlCoulpaMes’hJvestmeatinChinabyRegionl，。j了嚣琴曩5：PRD(Guangdong)YRDtShanghailiangsu，Zhqiiang)ShmldongNoriheastChiil口Source；TheExport—hnlmr，Bankf}rKorea42{{i"="83一"n一"¨58拍E96O7"鲫 Palt4KoreanFDllnChiHaFigure4-3CompositionbySelectedIndustriesofKorea’sFDItoChina(percentage)SelectedindusI．des1994199519961997199819992000200120022003*ManufacturingSector9I88457756438578l2844839827873Wholesaleandretall06l54924()50342l9276lReaIestate】76296248107464l4840OIher597514727290786．810l4824Sow'ceExport—hnpot，BankofKorea．‘JanuawNovember42．3‘lheSizeofKoreanInvestorsAmajorityoftheKoreaninvestorsinChinaaresmallandmediumsizeenterprises(SMEs)．KoreanSMEsledmuchofSouthKoreanFDIinChina，primarilyclusteredinnortheasternChina，includingShandongprovince，Tianjin，Liaoning，andJiangsuprovinces，andtheShanghaiarea．Mostofthemfocusedonlabor—intensivesectorssuchasmanufacturing(fiber，electronics，equipment，machinery，petrol—chemicalproducts)，transportation，mining，andconstruction．Recently，investmentsinautomobiles，telecommunications，informationtechnology，madtheparticipationofSouthKoreanconglomeratessuchflsSalnsung，LG，Hyundai，andSKhavestrengthenedeconomictiesbetweenthetwocountries．In1992．60．8％oftheKoreancompaniesinvestinginChinawereSMEs．Thesharedroppedsubstantiallyinthemid一90sbutbegantoriseagainin1999，andreached52t3％in2001．In2000—03，theaverageannualgrowthrateofFDIinChinabyKoreanSMEswasabout667percent．ThefactthatmostKoreaninvestorsinChinaareSMEsalsoshowsintherelativelylowaverageamountofcapitalinvestedbyKoreanfirms．Also，theaverageamountofFDIthatKoreanSMEsinvestedinChinadecreasedsignificantlyin1999—2000，whenitwaslessthan$300，000(seefigure4-4) FI)IIIIChilla～ACloseLookatSouthKorea’sFDJFurthermore，someconglomeratesinKoreaareenthusiasticallyreinforcingtheiractivitiesinChina．In2003，SamsungannouncedplanstotransfermostofitspersonalcomputerproductionfromKoreatoSuzhouby2005．Poscoannouncedplanstobuilda$20millionsteelplateplantinKunshanby2005tosupplytheShanghaicarindustrywithitsautomotivesteelplates．LG，anotherhigh—profileKoreannmltinational，planstoboostresearchanddevelopment(R&D)activitiesinChinaandturnChinaintooneolitscoreexportbasesFigure：4—4NumberofKoreanFDIProjectsillChina，ClassifiedbySizeofFirms1994—2003，percentageSizeoffiriLlS1994199519961997J99819992000200l20022003aLargefirmsNo．929l7350201l14162935％10912I1007．9762418I622．5SMEsNo．7496605802434467521，012I．302l，342％89．I87．980．092l92497698298497．8975Soulcc：Export—hnportBank∥Korea，www．koreaeximgo．kr／web／eng／indexdspajLtl?llal。v—Nnvember424Export—orientedFDl0neoftheimportantfeaturesOtKoreanFDIIntoChinaiSthatKoreanfirmsarelargelyengagedinprocessingtradeandparticipatingintheinternationalsegmentationofproduction．Korea’SFDIintoChinacontributestoincreasingKoreanexportstoChi,mbecauseKoreanaffiliatesinChinaimportlargeamountsofintermediategoodsandconlponentsfiomKorea．TheythenreshiplargeamountsoftheirfinishedgoodstothirdcountriessuchastheUnitedStatesandJapanThus，theshareofprocurementofintermediategoodsfromthehomecountryandtheshareofexportsfromalnongallfinishedgoodscouldbeclearindicatorsoftheprocessingtradeactivitiesofKoreanfirmsinChinaAccordingtoasurveystudyof Part4KorennFDlinChInaKoreanaffiliatesinChina，theshareofimportsfromKoreaintheprocurenlentofintermediategoodsisabout44percent，andalargepartoftheseimportscorrespondtothesupplyofcomponentsfromparentfirmstotheiraffiliatesforfinalassembly．Itcan，therelbre，becharacterizedasintrafirmtrade．Theshareofintrafirmprocul‘enlentwasabout40percent7fireshareofexportsalesisalsoveryhigh．amountingtosonle70Pel‘cent．Inparticular．exportstothethirdcounti。iesconstitutealargeshare一50．5percent．Inaddition，largeKoreanfirmsandKoreanSMEsinChinaapparentlydifferintermsofwheretheyselltheirfinalgoodsKoreanSMEs，inparticular，relocatesomesegmentsoftheirproductioninChinasothatChinaplaysacrucialroleofaproductionbaseforsomeKoreanSMEs．TheKoreanSMEsseemtotransferthedownstream，labor—intensivestagesofproductiontoChina．Tiffsspecializationinassemblyoperationshasbeenliequentlyobservedinthetextileindustryandintheelectricandelectronicequipmentindustry．4．3FutureTrendsofKoreanFDIiilChinaDuetoChinalssteadyecoltonlicgrowthandit'sjoiningtheWTO，China’sinvestmentreformareahasexpanded，themarketismoretransparent，andthedomesticmarkethasbecomemoreactive．ThereFOre，SouthKoreaninvestmentinChinawillcontinuetorise．Morespecifically，investmentinthetraditionalindustrialareaswillincl-easeatthesametimeasinvestmentrisesinhightechnology，precisionmachineries，carindustry，andcapitalandenergydevelopmentareas．Moreover，investmentintheserviceindustry，suchascurrency，finance，andcommunications，willgrow，andtheinvestmentinthemid-westdevelopmentprojectwillexpand．Bythen，ChinawillsafelypositionitselftobecomeKorea’smostpreferreddestinationforinvestnlent．Ontheotherhand，ChinesefilHiSwillacknowledgethecompatiblestrongSouthKoreanindustriesandinvestinstableandpotentiallyprofitableSouth45 Koreanindustries，therebycorrectingthesituationofone—wayinvestment4．31CompaniesVenturingintoChinahasbecometheworld’Snlos[attractiveplacefordirectinvestment．Koreancompaniesaren0exceptioninrelocating／expandingtheiroperationsinChina．Asanindication，ChinaovertooktheUSforthefirsttimein2002astiletopinvestmentdestinationforcompanies．Similarly，theKoreaFederationol、SmallandMediumBusinesssurveyed178smallandmedium—sizedenterprises(SMEs)andfoundthat775％ofthemintendedtomakeoverseasinvestmentintheflex[fiveyearsand72．2％citedChinaasthepreferredlocation．Again，securinglabor，productioncostreduction，andopeningupthemarketweretheirmainnrotivesInfluencedbytheeconomiccontractionaftertheAsianFinancia】Crisis，KoreaninvestmentinChinaexperiencedanabruptdownturnAstheeconomyrecuperating，togetherwithbeingencouragedbyChina’Seconomykeeponboostingthese20years，investmentinChinaturnedpositiveagainAccordingtothereportbyTradeAssociation，KoreanFDIinChinainthefirsthalfofthisyearsurpassedUSandJapanforthefirsttimeinhistoryandreacheditspeakUS$3．52billion，increased54，5percentthanthesameperiodlastyear．Evenintheworldwideeconomicdepressionin2003，theGDPofChinaincreased7．3percent，andtheaveragemarginalprofitrateofinvestmentinChinawasuptol9．9percent．Therefore，therearenodoubtsabouttheboostofFDIinChinainthefollowingyears．ExpandingInvestedAreas46 Part4KorcRnFt)IinChinaSouthKoreaninvestmentinChinawasinitiallylimitedtOthecoastalareasandthreeprovincesinthenortheast．InvestmentinShandongconstitutedapproximately40percent，withLiaoning，Tianjin，BeijingandHeilongjiangfollowinginorder．hnmediatelyfollowingtheestablishmentofdiplomaticties，theexpansionofChina’Sreformandopeningupandtiledeepeningofbothcountries’economictradecooperationrelationspushedKoreaninvestmentinChinabeyondtheinitialareas，expandingfromnorthtosouthandfromeasttoMidwest．InspiredbyChina’Swesterndevelopmentstrategy，KoreaninvestmentinmidwestChinahasbeguntoincreaseinrecentyears．However，becauseregionaldifferencesstillexistininvestmentenvironment，infrastructuredevelopment，andlaborcapabilities，KoreaninvestmentinChinastillremainsprimarilyintheeasterncoastalareas，whileinvestmentinthemid—westareasisstillawaitingfurtherexpansion．ChangingInvestmentStructureGraduallyTheinvestmentstructureofKoreanenterprisesinChinahaschangedgradually．UntilJune1993，KoreaninvestmentinChinawasmainlyinlabor—intensivemanufacturingindustries，whichconstitutedover90percentinbothnumbermadamount．Astimepassed，capitalandtechnology—intensiveinvestmentbegantoincrease．AccordingtotheKoreanimport—exportbank’Sstatistics，untilSeptember2001，fiberandclothingrankednumberoneinnumber(22．6percent)，butthetechnology—intensivecategories，suchaselectroniccommunicationtools，rankedone(25．9percent)ininvestedamount，surpassingtilelabor—intensivecategory，suchasfiberandclothing．Atthesametime，capital·intensiveinvestment，suchaspetroleumchemicals，machineequipment，transportationequipment，andassembledmetals，47 FDIInChina⋯ACloseLookatSouthKorea’sconstitutedalargeportion(about28．5percent)4．4ProblemsofKoreanInvestmentinChinainComparisonwithOtherCountries4．41．TheComparisonof’KoreanandEuropcan&AmeticanCompaniesinChinaInsufficiencyofLong—termStrategyAlthoughKoreaninvestorshopetorealize“secure，beneficial，midlow—cost’’investnrenl，manyofthemdidfallintodifficultyOneofthereasonsexistsintheirdeficiencyofeffectiveandcmnpleteresearchaboutChina’sinvestmentenvironment．ManyKoreaninvestorsrushedintoChinawithoutadefinitelong—termstrategyTheirknowledgeaboutChinaonlystayedathugemarket，lowtechnicalskills，cheapmaterialandsoon．Thereforetheyusuallymaynotmakeastrategicinvestmentplan．However，thisisnotthecaseforEuropeanandAmericanenterprises．ContraSttothepracticeol’Koreancompanies，theyoftencarefullychoosesomeemerging：sectorsandreahnswithgreatpotentialsafteralong—termstudyaboutChinesepolicies，economy，cultureandmarkets．Whenconfidentaboutthemarket，theyalwaysworkoutlong—terminvestmentstrategy．ThefirstinvestorsinChineseautomobile，energy，computerandsoftwarefieldsarealwaysEuropeanandAmericanbusiness．WhenKoreanenterpriseslearnedaboutthe掣eatSUCCESSofthesecompaniesandhurrytoenterthenmrket，theshareshadbeenfetchedandcompetitionhadbecomeveryserj01．Is． l’nrt4KoreanFDIiitChin日DefectsinInvestmentRealmsInspiteofthechangingofChineseeconomicenvironment，someKoreanenterprises，whichhadbeenmainlyusedtoinvestinlabor·intensiveprocessingsectors，havenotaccustomedtothenewsituationandfoundoutrightinvestmentmeasuresandreahns．ManyKoreanenterpriseshavenotrealizedtheimportanceofchoosingarightinvestmentrealm．Koreanenterpriseshadbeentransferringtheir“sunsetindustry”intoChina，alwayssectorsfocusinginlabor—intensiveindustrybasedonlowcostinChinaandfewishigh—techindustry．Mostofthemclusteredinlightindustrymadconsumingindustry，suchastextile，TVset，refrigerator，airconditioningindustriesandSOon．SincethedevelopinglevelsofthesesectorsaresimilarinKoreaandChina，thefrictionandcompetitionareunavoidable．ThesealsotendtobringdifficultiestotheperformanceofKoreanenterprise．AccordingtoareportbySamsungEconomicInstitution，Koreanproductsonlypresentedadvantagesin32percentofthetotal123kindsofKoreanandChineseproducts．71"heotherKoreanproductsareeitherequaltoChinesegoods，oratadisadvantagepositionintheviewofpriceandtechniques．Ontheotherhand，KoreanEconomicInstitutionclaimedthatthereare55kindsofKoreanproductsholdinglargestsharesintheircorrespondingmarket，whichisonlyone-sixthofthoseforChineseproducts，306kindsWiththefastdevelopmentofChineseeconomyandtheoptimizingofindustrialstructure，Chinesefactorpricestendtoincrease，thelow—costadvantageisfadingaway．Insuchsituation，theadvantagesofKoreancompaniesintoy，textileandotherlabor—intensiveindustriesaredecreasing FDIInChina--．ACloseLookatSouthKorea'sIncontrasttoKoreancompanies，EuropeanandAmericanenterprisesmainlyfocusedinhigh—techreahnasenergy，automobile，heavymachine，semiconductorandSOon．7l'herearefewcompetitionsinproducingtheseproductswithChineseenterprisebecauseoftheirdifferentdevelopstagesForinstance，automobilesproducedbyEuropeanandAmel‘icanentre‘prisesaccountfor80percentofthewholemarketinChinaInsuff／eientLocalizationMostoftheEuropeanandAmericanenterprisesinChinaattachgreatimportancetobusinesslocalization．’lheynotonlypurchasematerialsandcomponentsinChina，butalsonominateChineseastheirmanagers．evenexecutivedirectors．Forinstance，thegeneralmanagerofMotorola(Tiaujin)，Philips(Beijing)／mdmanyothermuItinationalsareChinese．However，thisiSnotthecaseforKol。earlcompamesinChina．Most0Itheirnaaterialsneededareimportedabroad．Ontheotherhand，managersinKoreancompanies，includingleadersofproducing，purchasing，marketingevenlogisticdepartment，areallKoreans．Chineseusuallyhaslittlechancetobepromoted．Therefore，thecostofKoreancompaniesishigh，andconflictsareeasytooccurbecauseofthedifficultyofcommunicationanddistrustbetweenthemanagementandnormalstaff．ItishardforKoreancompaniestOkeeptalents，andmanyofthemleaveafteronlyseveralyearsevenseveralmonths．Ontheotherhand，nolocalpersonsinvolvingthemanagementalwaysleadtothedifficultytocommunicatewithlocalgovernment．4．4．2TheComparisonofKoreanandJapmlintoChinaWithregardstodirectinvestment，Chinaismainlyarecipient，whileKoreaandJapanarebothinvestorsandrecipients．BothKoreanandJapanesedirectinvestmentinChinaincreaseduntilthemid一1990swhenthinewasaslightslowdown．Korean50 Part4KoreanFDIinChinadirectinvestmentinChinaamountedto$824millionin1995，andcontinuedtodecreaseto$307millionin2000Meanwhile．Korea’SdirectinvestmentinChinaasashareofitstotalforeigndilectinvestn+ent(FDl)peakedin1994，whenitreached27．5％．beforefallingto83％in2000．Japan’SdirectinvestmentinChinaasashareofJapan’SoverallFDIhasalsodiminishedrecently，droppingdralnaticallyflora$4．47billionin1995(8．8％oftotalFDI)to$995millionin2000(2．0％oftotalFDI)．In2000，thesharesofKoreanandJapaneseinvestmentinClfina’StotalinwardFDlwere3．7％and8．2％．respectively．’l'herearelotsofsimilaritiesbetweenJapaneseinvestmentinChinaandKoreaninvestmentinChina，suchas，bothtransferredgraduallyfromnortheruChinatosouthernChina，atthebeginningbothfocusedonlabor-intensiveandconsumerproductssectors，andthemajoritiesofinvestorsaresmallandmediumenterprises，andSOon．However，comparingwithJapaneseinvestmentinChina，KoreaninvestmentinChinadoesIlavesomespecialcharacteristicsandproblems．Korean|nvestnlentinChin“JapaneseInvestmentinChinaAmount(US$mil．)ShareofKarea’sFDIAmount(US$m11．)ShareofJapan’sFDIf％)(％)1993264209l，69I4719946322752，5656319958242684，473819968361972，510521997633196l、98737199863Il621，06526199930812I75Il200030783995*2O+I)IIFCESTheExport-lmpo—BankoJKD，1ec，．JapanE．xte’’2(】fnodeOrganizafionNote：’J蛔Ⅷ舟，mf址^fmf^fHt，f}帅mc5l FucusofInvestmentChangedOppositelyAtthebeginningof1990s’，mostKorcaninvestnaentsinChinafocusedonmanufacturesectors，whichaccountedtbrabout90percentoftotalvalue．Thennon—naanufacturesectorsboostedveryPast，tireratiojumpedfrom3．2percentin1990to18pm。centin1999．Amongthem，restauralltSandrealestategrowfastestIncontrasttosuchtrends，Japaneseinvestmentonmanufacturesectorsaccountingforthetotalvalueincreasedyearly，whileonnon—manufacturesectorsdecreasedcontinually．Theinvestmentonchemicalindustryonlytook3percentoftotalinvestmentatthebeginningof90s’．whileboostedto12percenti111999；theinvestment011transportmachinesincreasedto13percentattheendof1990s’from1percentatthebeginningof1990s’，Meanwhile，theratioofJapaneseinvestmentOnnon-manufacturetototalvaluefelldown26percent，from54percentatthebeginningof1990s’to28percentattheendof1990s’，MoreKoreanEnterprisesClosedDownorWithdrewInvestmentThereareagrowingnumberofKoreancompaniesclearingtheirbusinessoutofChina．EversincethefirstcaseofwithdrawingfromChinatookplacein1993，suchcasesofevacuationhavebeenincreasingbothinnumbersandamount．Inparticular，thereare19casesofbusinesswithdrawsbyKoreancompanies，whichamountedtoUS$730million．TheKoreancompanieswithdrawingfromChinaincreasedtwotimesinnumber，andmorethan100timesinamountinin2001．Consequently，KoreannetjnvestmenttoChinadecreasedforthefirsttimein2001asthesizeofbusinesswithdrawsexceededthatofnewinvestmentAsoftheendof2001，IhenumberofKoreaninvestmentwithdrawsfromChinaincreasedto98，andtheyamountedtoUS$850million．or15．7percentofallKoreaninvestmentinChina．52 Parl4KoreanFDlinCIfinaTheincreasingnumberoffailureofKoreaninvestmentinChinareflectsthelackol、prudenceillmanyoftheinvestmentundertakenStillalargenumberofKoreancompaniesarebelievedtobemakinginvestmentintoChinaonlywithsolncambiguousexpectationswithoutanalysisoftilevalidityofinvestmentinChineseindustriesHowever，thisisnotthecaseforJapaneseenterprises．Japaneseareverycautiousoftheirinvestment，alwaysinjecttheirmoneyonlyafterresearchingseveraltimes．Ontheotherhand，theyalsolayagreatimportanceonR&Dandrenovationstoimprovetheircompetitivecapabilities．IllcontrastingtOthis，manyKoreanenterprisesrashtothemarketwithlittleresearch．Moreover，technologiclevelimprovedslowlyaftertheestablishmentofbusiness．Althoughtheycanmanagetogothroug!aatthebeginning，tilecompetitivecapabilitiesdecreasedgradually，andfinallyhadtoclosedownorwithdrawthecapitalInvestmentAreasareConccntratedinNorth-easIChinaTheinvestmentofKoreanenterprisesisconcentrated，mainlyinnortheastChinaandBohaisearing，suchasHeilongjtang，Jilin，Liaoning，Hebei，Tianjin，BeijingandShandong．Thesesevenprovincesandcitiesaccountedfor83．7percentofthetotalamount，and66．1percentofthetotalvalueofKoreaninvestment；whileJapaneseinvestmenttransferredfromDaliantosouthernChinaafterthemiddleof1980s’．EspeciallyafterDengxiaoping’stourofsouthernChina，thepaceofJapaneseinvestnlent’transfergetevenfaster．In1991tileinvestmentflewtosouthernChinahadsurpassedthattonorthernChina，althoughthedifferenceatthattimeisnotveryapparent．Koreanenterprisesinvested192projectsinDalian，ShandongProvinceandBeijing，while280inGuangdong，JiangsuandShanghai．However，duringthefoLlowingyearsthegapkeepsgetting FDII¨CI】j¨目一ACloseLook口ISo,lhKoreR’sFDJgreater．Tilegaproseto439in1993，and735in1995，thatisabout7timesmorethan1991．Incomparisonwiththis，itseenlssluggishforKoreanenterpi’ises’expansiontosoufllernChina．InsufficiencyofTrainingforStaffsJapaneseenterpriseslaygreatimportanceonstafftraining．Theynotonlysetdownlong—term，mid—term，andshort-termtrainingplans，butalsosendstaffsabroadfortrainings．Japaneseenterprisesbelievethatthedevelopmentofbusinessisbuiltonthebaseofthedevelopmentofthes诅fflSOntheotherhand．thereareallkindsofseminarsinJapaneseenterprises，throughwhichthestaffsCalllearnalotaboutthebusinessandthesociety．Nowsuchseminarshavebecomeoneofthemostmeasuresforstafftraining．1,1contrastingtothis，Koreanenterprisesinputlittlemoneyontraining．Somecompaniesevenhavenotrainingplans．Eventhereare，theyarealwayssetforKoreanstaffswhilefewChinesemayinvolvein．Therefore，somestaffshaveafewideasabouttheenterprises，evenlessaboutwhatisgoingonintheindustry．LessCommunicationwithConcernedChineseDepartmentsJapaneseenterprisesinChinaattachgreatimportancetothecommunicationwithlocalgovernmentdepartmentsconcerned，whichpromotesunderstandingandrelationshipdevelopmentbetweeneachother．SometimesJapaneseembassyorsomeresearchinstitutionsinvitestilestal't’SofJapaneseenterprisestOdiscussandexchangeopinionsaboutthebusiness，Incontrasttothis，fewKoreanenterprisesholdsuchactivitiesinChina·WiththefastbusinessdevelopmentbetweenChinaandKorea，frictionsandproblemsappeared Part4KureanFOlinChinaunavoidable．Communicationandopinionexchangesarehelpfulforproblemssolutions，4．5KoreanMultinationalsiI'1C11ilaaComparingwithsomefamousEuropean，AmericanandJapanesemultinationals，Koreanlargemultinationalshavetheirowncharacteristics．WiththedevelopmentofKoreaninvestmentinChina，theyareplayingevenmoreimportantrolesinChina’Seconomy一4．5．1．CharacteristicsofLargeKoreanMultinationalsMostlargeKoreanmultinationalshadnotestablishedtoolongatime．HyundaiGroupstartedfromHyundaiC。onstructionCompanyin1946；Samsungwasfoundin1938andflourishedsincetheestablishmentofSamsungMoolsanin1951Incomparisonwithothertraditionalmultinationalcompaniesinindustrialcountrieswhichhadsetupmodernenterprisesystem，theirhistoryisshortandfamilyrelationshipalwaysstillplaysallimportantroleinthetoppower．EuropeanandAmericanmultinationalsusuallyfocusononebusinessandonlyexpandtothecomponentsproductionormaterialobtainrelatedwithcorebusiness．Forinstance，althoughDaimler—Benzealsotakespartinlotsofbusinesses，includingautomobile，airplane，electronics，andconsultancy，mostofthemarestilllimitedinmanulhcturesector．However，largeKoreanMNCsnotonlydevoteinmanufacturesector，butalsooperateinsomeemergingsectors，trade，transportandinsuranceetc．Suchkindofstructureishelpfulforthecompaniestospreadrisksandsecurecapital．Ontheotherhand，thestructurealsomayeasilyleadtoinsufficiencyofcompetitivecapabilityforthecoreindustry．55 FDIlnChiila—ACIoseLookatSoufllKorea’sFDJSK，nowISthenumberthreeconglomeratessinceDaewoocollapseandHyundaisplit．GroupstrategyseminarinShanghailastNovemberchosethreestrategicinvestmentareas：11’，bioengineeringandtransport(vehicles，Ifighways)withplanstoinvestW45bn(US$34m)inthefirsthalfof2003Itlooksoddchoicesforagroupbestknownfornilrefiningandderivatives，whichbranchedouttobecomeSouthKorea’stopmobiletelephoneserviceproviderSKistargetingthevibrantmobilesectorinChina，too，beginningwithwirelessportaloperationsmidcontentdevelopment．AsforitsbioengineeringresearchcenterduetoopeninShanghaisoonSKsaysthiswilldevelopnewChinesemedicinesandtreatmentmethods．SelectionofI)ist“butionLargeKoreannmltinationalsalwayschoosesonicareasasinvestmentbaseanddevelopcorebusinessthere，theninvesttothewholecountry．SamsungchoseTianjin，SuzhouandHuizhouasproducingbases，wheretheylocatemostoftheirprojects．LGdistributesmostofitsinvestmentinQingdaoandDalian．AftertheyhadsettleddownmadwerefamiliarwithChina’smarketandenvironment，theselargeKoreanmultinationalsbegantopushactivelytootherareas．PartnerSelectionEuropean，AmericanandJapanesemultinationalsalwaysliketocooperatewiththoselargestate—ownedfirmswhoarerunningwell．Theircooperationiscalled“strong—strongalliance”．However．sinceKoreanmultinationalsenteredChinamorelately，theyoftenarenotconsideredastheNo1choiceforlargeChinesefirmstocooperate．Therefore，Koreanenterpriseshavetochoosesomelargestate。ownedenterprisesindifficultyastheirpartner．Ibnningso·called“strong—weakalliance”． Part4Kore：】lnFI)Iin(1hinflTheyhadpresentedtheircapabilitiesthroughtakingpaninsystemalterationandbringbackvigortotheseagedenterprisesSamsungestablishedtheirjointventureswithSuzhouRefrigeratorFactory，TianjinCameraFactoryandTianjinWirelessComponentsFactoryrespectively；LGfoundtheirswithTianjinRefrigeratorFactoE，，BaihuaGroupofShenyang．HyundaiMotorinvestsUS$300minChinain2004，includingareposednewplantinornearBering．ItsKiasubsidiary，whicha／readyhasajointyen／ul'einJiangsu，isjoiningwithChina’SDongFengtObuildanewplantwitha300．，000一unitannualcapacity．HMexpectsChinatobetheworld’Sthirdbiggestearmarketby2010，with6．5msalesperyear．4．5．2AdjustmentofStrategyofLargeKoreanMultinationalsinChinaTheinvestmentofKoreanmultinationalshasbecomeanimportantcomponentofKoreaneconomy，andthereturnsfromtheinvestmentinChinacontributegreatlytototalincomeofthecountry．AccordingarecentreportofKoreanindustrialresourcedepartment，China’SaccessionintoWq0andhosting2008OlympicgamewillboostthetradebetweenChinaandKorea．．ItiSestimatedthatthescaleoftradebetweenChinaandKoreawilltripleby2008，reachUS$102．5billion．Theevenbrighterfu【tureltiresnloreKoreanmultinationalsrushintoChina．AstheinvestmentenvironmentinChinaischanging，Koreanenterprises，especiallylargeconglonlerales、suchasSamsung，SK，I．GandHyundai，realizedthattheyhavetoadjusttheirstrategiestofitthenewsituationsandimprovetheperformanceoftheirbusjnessinChina．LocalizationStrategyInordertOmakemoreprofits，Koreannmltinationalsareperformingthelocalization57 FDIl¨Chiila⋯ACloseLookatSoutlnKorea’sFDJstrat69ywhileexpandingtheirinvestmentillchinaandThatis，trytOcompletewholeprocessofproductionandsalesinChina，reducetheamountofstal]idispatchedfromtheparentcompanyandfindsometalentsatlocalplacetocultivatebecomeseniordirectors．Stafflocalization—theprocessofdevelopinglocalemployeestoalevelwheretheyareequippedtotakeOiltheresponsibilitiesandpositionsheldbyexpatriates—isacentralcomponentofKoreanMNC’Sstrategybecauseofitspotentialimpactontheoperationalefficiencyandfinancialsuccessofit’SforeignoperationsManyKoreancompaniesseethehugecostsofemployingexpatriatesandrushtoreducethennnlbersofexpatriatesandreplacethemwithlocals．Othersbelievelocalstaffshavefewerlanguageandculturalbarriersincommunicatingwithemployeesandcustomers，andthishelpsthempenetlatetilemarketandbuildrelationships，includingthroughguanxi．InordertocreateanotherSKwiththeslogan“OftheChinese，bytheChinese，fortheChinese”，itisdoingeverythingpossibletoensurethatitscompaniesaretrulyChinese．WithseveralexceptionsofrepresentativesfromKorea，itemploysChinesepeopleinpositionsrangingfromCEOsoflocalsubsidiariestogenerNemployees．Inthissense，itisfollowingatruepolicyaimedatathoroughsignificationofitsChinabusiness．SamsunghadalsoraisedthestatusofCOOtotheSmilerankofvicechairmanofitsKoreanhead州啊ce．GlobalR&DStrategyAccordingrelatedstatistics，morethan1000R&DinstitutionsareestablishedinChinauntiltheendof2000．AttractiveChinesehugedomesticmarketmaybeonereason，makinguseoflocaltalentsanadbasictechfacilitiesanother，theseriouscompetitionamongglobalmultinationalsisthedirectreasonofthetrend．Asthe58 Pa|_t4KOPeallFDlinCllillaproceedingofglobalization，alargenumberofmultinationalsbegintoestablishR&Dinstitutionsintargetedmarkets．UndertakingR&Dlocallynotonlymeanscollectinformationaboutlocalmarket，butconstructlocalR&Dsystemreflectingdefinitelocalbusinessrunningenvironmentandcommunicatingwithinformationabroad。Eithertluoughmerging，orestablishingnewones，KoreanenterprisesmanagedtosetupR&Dinstitutionstotakeadvantagesofoverseatechnicalresources．．LargeKoreanmultinationalsinvestinginChinano『、．varenotsimplyaimingatestablishingproducingbases，buttbrminganewsystemthroughwhichfulfillthewhole’circleofproducing，transferandreinvestment．LGgroupplanstoincreaseitsR&DworkforceinChinato1，000overthenext10yearsfromthecurrent50researchersLGGroupsaidatitwouldexpandinvestmentinR&DandestablishanR&DglobalbasecenteredinChinaBeijingSamsungCommunicationTechnologyResearchInstitutewasestablishedonOctoberI2，2000．ItisthefirsttelecomresearchestablishmentsetupbytheSamsungCompanyoftheKoreainChina．ItwillsupplyChina’SmobiletelecomindustrYwithabundantteclmologicalsupportandplayanactiveroleinboostingthedevelopmentoftelecomteclmologyandindustryofChinaandtheRepublicofKorea(ROK)．Themedium—andlong—termtal’getoftheinstituteistomakeitselfacomprehensiveresearchinstituteintheelectronicfieldengagingincomprehensiveR&Dinthedigitandmulti·mediaaspects．Inaddition，itwillundertakethetransferoftheIMT2000systemendterminalproductsandteclmology，andproducecorepartsofmobiletelecomthroughitslegalpersonwhoistOinvestinproduction．TheresearchtopicisIobechosenjointlybytheROKSamsungCommunicationResearchInstituteandtheBeOingSamsungCommunicationTechnologyResearchInstituteinaccordancewithChinesemarketdemands．m“p：nwww．peopledailF,com,cnFriday,October FDI|IIChiIIR⋯ACloseLookatSoIIIIIKorea’sFDI13．200∽Long—termStrategyIllcomparisonwithEuropean，AmericanandJapanesecompanies，Koreanmultirrationalswereshortoflong-terminvestmentstrategy．Tosurviveintheseriouscompetition，nowmanylargeKoreanmultinationalshasconstitutedlong—terminvestmentplantodrawmoreprofitsfromChina‘seconomicboom．7lheselargeKoreancompaniesnowdonotbegi‘udgemakinglongtimeinvestmentstrategyanddonotseekshort-termprofitsInordertoenablelocallyrecruitedpersonnelresourcestobetterunderstandandapplySKcultureandbusinessmethods，theSKGrouphasaprograminwhichnewlyrecruitedemployeesareinvitedtoKoreaforthreeorfouryear’straining，andthensendbacktoChinaaskeyemployees．LGrecentlymmouncedtoilwestUS$400millionforputtinguptwo”LGBeijingrlowers”of30storieshighalongtheChang’anAvenueforitsheadquartersinChina．Inthemeanwhile．Samsungalsore-pumpedUS$46millionforasecondfactoryinitsSuzhouIndustriaIPark．1tigh·techStrategySomeChinesemanufacturershadimprovedtheirtechnicaIexpertiseatafasterpacethanmostKoreanenterpriseshadexpectedespeciallyinlowvalue·addedsectorsAlongwithChina’sgraduallyadjustingitsindustrialstructure，timeishardformany“sun—set”industriessuchasprocessingmidlabor—intensivesectors．Mostofthe16000KoreancompaniesinChinamainlyconcentrateinlabor—intensivesectorsandproducinglow—techconsumingproducts，andmanyKoreantraditionalstrong Parl4Koi-earlFDIIiiChinaindustriessuchaspapermaking，ethanesectorsarelosingtheirpositionsandbeensqueezingoutofChinesemarketlnspiredbyChina’srisingcompetition，manyKolem『1tcompanieshadchangedtheirdirectiontopursuehigh—techstrategy．AsSamsungadvancesaggressivelyintotheChinesemarket，itisnottryingtocompetet11】roughlowerlaborcostbuthighvalue—addedproductsInitscoreIT／electronicsbusinesses，SamsungElectronics(SEC)andotheraffiliatesplantoincreasemmualsalesinChinafromthepresentUS$7bnby20％ayeartoUS$I4．5bnby2005．Themainfocuswillbeonsuchhighvalue—addedproductsasmobilephones(especiallyCDMA)，telecomequipment，plasmadisplaypanelsandprojectiontelevisions．SamsungSDlwillmakeChilmitsproductionhubforbrauntubes．R&DtodevelopnewmodelsspecificallyfortheChinesemarketwillgrow．GotoWestStrategyInordertoachievebalancednationaleconomicgrowtllandllarrowthegapbetweendifferentregions，Chinahasdecidedtofocusonthewesternregioninitseconomicdevelopmentinthe21stcentury．Timgovermnenttakesthenarrowingofthegapbetweentheeasternandwesternregionsasalong—termpolicy，andhaspromulgatedaseriesofpreferentialpoliciestoencourageinvestmentinthewest．+fhisstrategyhasopenedupahostofbusinessopportunitiesforforeigninvestors．ForeigninvesttnentinadvantageousiudustriesinwesternChinaisencouragedandtherestrictionOilshareholdingrateandindustryhasbeenloosened．BesidesthattherearespecialpreferentialpoliciesforlbreigninvestmentinwesternChina．Forexample，investmentofcementfactorywithaproductioncapabilityofabove2000tonscanenjoypreferentialpoliciesonlywheninmiddleandwesternareas；Explorationandexploitationofcopper，leadandzincresourcesandexploitationand6 FI)JI¨Chbm⋯A(10seI，ook射SoulbKo-en’sFDJsmeltingoflow—gradegoldminescanalsoenjoypreferentialpolicesinwesternareasMoretha1160oftheworld’Stop500lndustrialenterpriseshaveinvestedinwesternChina．Koreawillstrivetogoaheadofa11othersoratleastgoalongsideothersinChina‘SwestdevelopmentdriveROKisreadytomakemedium—andlong—terminvestmentinthewesternpartofChina．LargefirmsasSamsungandHyundaiandsomesmallandmedium—sizedenterprisesandbankshopestogetinvolvedintheUrumqi—Shanghaigaspipelineproject．OtherprojectsforcooperationmayincluderoadconstructionandcivilaviationinShaanxiKoreancompaniesplanstoinvestonemillionUSdollarseachyearinafforestationinBaiyinandPingliangofGansuProvince，HanchengCityofShaanxiProvinceandtheupperreachesofMiyunreserviorinBeijing． Part5ProposalsforAttractingMoreKoreanlnvestment；ntoChina5Proposalsfoi‘AttractingMoreKoreanInvestmentintoChinaDimcuriesAccordingtoasurveytherearemanydifficultiesforKoreanFDIinChina，suchasissuingvisas，protectinginvestmentsandindirectnessincontractualmatters．InadditionKoreaninvestorslisteddifficultiessuchaspoorinfrastructureandcommunicationnetworks，passiveattitudesofworkers，etcThefollowingarethemostconlmonproblemsandobstaclesencoutateredduringtheoperationofplantsillChinabyKorean1irms：Production·lowlaborproductivity·lackot’incentivesforhardwork·bottlenecksinsupplyofrawmaterials；insomecasgslocalpricehigherthanimportprice(e．g．，herbalmedicine)‘lackofinte“ndustriallinkageInstitutionandinfrastructure·poorinstitutionalarrangements(visaissuing，foreignemployment，investmentprotectionagreement)’corruptioninbureaucracy(unwillingnesstocooperate)·lackofinfrastructure(communication，watersupply，portfacilities，electriqsupply)Proposals’fhereareloisofcomplementaryelementsbetweenKoreanandChineseindustrial FDllIIChina⋯AClOSeLookatSouthKorea’sFDIIIstructures．AlthoughKoreaninvestnleuttuChinahasbeenincreasedsteadilysince1990s’，thescalehasbeenfarfromthelevelthatsupposedtobe．AndintheviewofthetotaleconomiccapabilityofKoreaandChina’Slargeneedsforinvestment，thereiSsilllhugeroom{"ortheexpansionofKereaninvestmentinChina．ChinaneedstolaymoreimportanceondrawingKoreaninvestmentcomparingwiththatonEurope，U．S、andJapan．Chinaneedstoimprovetheeconomicenvironment，whichhasbeencomplainedheavily，andtakereasonablemeasurestoattractKoreanmoney．I．DevelopingSoftInfrastructureforInvestmentEffortsmadebyChinainimplovinginvestlucntenvironmenthavebeenaffirmedbythebusinesscommunity，butCbinashouldfurthersimplifyitsinspectionmadapprovalproceduresontbreigndirectinvestment，givepracticalprotectionoftheintellectualpropertyrightsofinvestors，improvethemechanismforhandlingcomplaintslodgedbyinvestors．andaverttheincreaseofproductionandlaborcostscausedbystructuralimpedinaentsbyacceleratingstructuralreformstocreateasoundandpredictableinvestmentenvironmentforenterprises．InviewofthefactthataftertheAsianfinancialcrisis．tradeandinvestmentbetweenthetwocountriesunderwentarecoverygrowthandthebeneficialinteractionoftradeandinvestmentgeneratedawin—wineffectOIltheeconomic掣owthandstructmalreformofthetwocountries，itishopedthatthestateleadersgiveapositiveappraisalSOastocreateasoundatmosphereforfurthereconomiccooperationmnongthetwocountries．ToluremoreKoreanenterprisesinvestintoChina，thegovernmentshoulddevelopthesoftinfrastructure，whichisconsideredthebasisfortheseactivities．Althoughtheestablistnnentandimprovementofthelegalsystemandjudicialregimes，thedevelopmentofindustrialstandardsandmeasurementmanagementsystemsinChinahavemovedforwardfast，suchissuesstillneedtobeaddressedgraduallyina Part5ProposalsforAttractingMoreKoreanInvestmentintoChinaconcentratedmannerIncreasePolicyTransparencyKoreanFDIenterprisespointedoutthatthesuddenchange，lackoftransparencyandconsistencyinpolicyimplementationinChinaaremajorobstaclesandriskinattractingpotentialinvestors．7lheprocessofchangeshouldbeopentothepublicsothatforeigninvestorscanpredictchangesandminimizenegativeeffects．Forthetimebeing，manyforeigninvestedenterpriseswouldliketheChinesegovernmenttoestablishrelationshipsbasedonmutualtrustwithinvestorcommunitythroughdialogues．Inordertoincreasethepolicytransparencyofthetwocouutriesandprovideenterprises(small—andmedium—sizedenterprisesinparticular)withmoresufficientinformationservice，bothcountriesshould，bymakingfulluseofthecurrentwindowsandchannels，jointlyestablishaninformationexchangeplatformandnetworkfortradeandinvestmentsoastopublishlaws，regulationsandpoliciesrelatedtotrade，investmentandothereconomiccooperativemattersofthetwocountriesAlthoughtheChinesegovernmentismakingeffortstoimprovetheinvestmentenvironment，ithasnotbeenveryactiveinpublicizingrelevantinformationtopotentialinvestors．ThisjointinitiativeisveryimportantbecauseitwidelypropagatesinformationonChina’sinvestmentenvironmenttomanyinvestors．Thereisnomiracleremedyforattractingforeigninvestment．Nevertheless，theChinesegovernmentcanmakeforeigninvestorsfeelsecureabouttheirinvestmentactivitiesthroughcontinuouseffortstoimprovetheinvestmentenvironmentandincreaseitsdialoguewithinvestors． FI)IIllOhhia⋯ACloseLookatSoothKorea’sFDI11·AdvancetheLocalizationofKoreanEnterprises’rheeconomiccooperationbetweenKoreaandChinashouldbeaimedatmutualbeneficialdevelopment．Thatis，throughclosecooperationbothsidessharethebenefitsofcommonprosperity．Inthissense，thebasicpointsofthedevelopmentofKoreanenterprisesinChinashouldbetheadvanceoflocalization．1,ocalizationistheprocessol、adaptingaproduct(oftenbutnotalwaysasottwaroapplicationorhardwarecomponent)toineetthelanguage、culturalandotherrequirementsofaspecifictargetenvironnlentormarket(a”locale”)．Inreality，itisaconlpl。ehensiveprocessthattakesaproduct(andacompany’Snamealongwithit)intoflforeignmarket．Itcarlbevitaltoacompany’SSuccess．Although“allKorean”managementseemsrightatpresent，itblocksfuturegrowth．KoreanenterprisesinChinashouldbemanagedbylocalpeopleforlong—termstrategy．LocalizationisthestartingpointThedifferenceofpoliticalsystemsandculturebetweenKoreaandChinashouldnotbecomethereasonsforrefilsinglocalization．KoreancompaniesshouldadapttO】ocaIsituationsandculturetocreatetheirownbusinessculture．Actually．todate，mostwinningenterpriseshavelocalizedtheirbusinesssuccessfully．KoreanenterprisesinChinaneedtolieemphasesonlocalizationwhichincludingthefollowingthings：Thelocalizationofmaterialandcomponentspurchasingcanbenefitbothsides．Chinawouldbesatisfiedwiththeexpansionofemploymentandpromotingeconomicdevelopment，whileKoreanenterprisesalsocallbebenefitedfronllowercostofproducing． Part5ProposalsforAttractingMoreKoreanInvestmentintoChina1)Tilelocalizationofsales．ThatcallopenmoresaleschannelsfortheKoreanenterprises011whichbasesalsocanadvancetheexporttothethirdcountry，orevenexportbacktoKorea．2)Stafflocalization．Reducetheexpatriatesfromparentcompaniesandexplorelocaltalentstocultivatemid—managementexecutives．Meanwhile，itisalsoneededtopromotethetrainingsystem，transparentizethewayol、recruitments，theresearchfundsandscholarshipassigmnents3)LocalizationofR&D．7fhatis，collectinginformationaboutlocalmarket，constructingessentiallylocalizedresearchsystemtohelpwork，andpromotingtheinformationcommunicationwithabroadnewlydevelopedtechnology．4)Localizationofmanagement．Intheviewoflong—termstrategy，theKoreanparentcompanieshavetobecourageousenoughtoremisepowertothesubsidiariesandprovidethemtherightstooperateindependently．1II．EncouragingKoreanInvestmentto“GoWest”Inordertobalancetheeconomicdevelopmentamongregionsandareas，theNationalPeople’SCongressapproved“TheNinthFive—YearPlan”in1996．Thisplanaimstofulfillabalancedeconomicdevelopmentamong7areasincludingGreaterBohaiSea，NortheastArea，ChangjiangRiverDelta，MidlandFiveProvinces，SoutheastRelatedCoastal，SouthwestandSouthern，andNorthwestAreasbasedupontheirrespectadvantagesandcharacteristics．Italsoencouragesmoreforeigninvestorstoinvestint11ewesternareasofChinaTodate，manyKoreaninvestorshavemadegreatsuccessbytakingadvantagesofbetterbasicfacilitiesandaloreconvenienttransportationsineastandmidChina． FD-1nChin；i⋯ACloseLookatSouthKorea’sFDIHowevcr，thesituationsarechangingDOW．Astheincreasingoflaborcost，eastareaislosingitscomparativeedgeOilcostTherearenotonlyrichhumanresources，butalsonaturalresourcesasforests，waterpowel’，oilandinines．Since·Koreanprocessingindustrialshavebeenwelldeveloped，itwillbereasonabletosaythatthefutureisverybrightforKoreanenterprisesinvestinChina．Ontheotherhand，thefactthatforeigncapitalsconcentratingin'eastchinamakeitdifficultforKoreanfirmsdrawmoreprofitsfiomtheinvestment．Forinstance，mostcapitalsfromHongKongandMacaoarelocatedillGuangdongprovinceandHainanprovince，JapanesefirmsliketoinvestinLiaoningprovince，whileAmericanmultinationalsarefavoredinShanghaicity．Suchkindofdistributioncanbeattributedtobothgeographicandhistoricalreasons．Therefore，itishardforKoreansmallandmiddleenterprisestoexpandtheirinvestmentsineastareawheretheyareindisadvantagesincomparisonwiththeEuropean，American，JapanesecompanieswithrichinvestmentexperienceinChina．Insuchconditions，itmaybeabetterchoiceforKoreancompaniesto“gowest”．Meanwhile，thereareotherfavorablethingsforKoreanfirmsinvestinginwesternChina．Thatis，inordertoattractingFDI，manyfavorableinvestmentpoliciesaregiven，includingdecreasingorfreelocaltaxes，loosetherestrictionoftheratiotosaleinlromelandandsoon．IV．AttractingMoreInvestmentofLargeConglomeratesKoreaninvestmentinChinaismainlyimplementedbysmallandmiddleenterprisesconcentratinginlabor—intensivesectors．’IheaveragescaleofKoreaninvestmentisnotonlylowerthanmostoftheforeigndirectinvestmentinChina，butalsolowerthattheaveragescaleofKoreaninvestmenttoothercountries．Smallinvestmentscaleusuallyisfragiletodefendthecnvironmentrisksandrunningrisks．Onnile Part5ProposalsforAttractingMoreKoreanInvestmentintoChiilahand．itishardforsinailandmiddleenterprisestoadapttotheeconomiccnvitonment；Oiltheotherhand．somejnvestmentsofsmalJandmiddleenterprisescannotexistforalongtimebecauseofthedeficiencyoflatercapitalinjection．Therefore，askeepingonattractingandmaintainingtheinvestmentfromKoreansmallandmiddleenterprises，Chinashouldlaymoreimportanceonattractingtheinvestmentfromlargenmltinationals．Withthesupportofsufficientcapitalandlatesttechnology，itcanbepossibleforlargeenterprisestotakelargeprojectsandeuduresomeeconomicenvironmentalchangesandothershocks．V．EncouragingInvestmentinTechnology—intensiveIndustriesThroughoutthe1990sastheamountot’FDIrosetoasubstantiallyhighlevelandactivitiesofforeign-investedfinnsseepedintoalmosteveryfieldoftheChineseeconomy，thepatternsofforeigndirectinvestmentwitnessedtheimportantchange：investmentinlabor—intensivemanufacturingindustryentereda“saturation”stage．andtechnology—intensiveindustriesbecamethenewfocusofinvestmentfromdevelopedcountriesChinesegovernmentismorepreferentialtowardFDIthatpromotetechnicaltransfertoChina．FromChina’sviewpoint，itisrelativelylessexpensivetohavetechnologytransferredfromcountriesIikeKorea，ratherthanfromEuropeandAmerica，withwhomChinahasalargetechnologygap．Therefore，ChinashouldencouragecooperationwithKoreanenterpriseinthefieldslikemobilecommunications，seIniconductorsandautomobiles．andpromotecomplementaryrelationshipthroughsuchcooperation． 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REFERENCEI7．SylvainPlasschaertPK．M．Tharakan；D．VanDenBulcke，Intemational+l'rade，ForeignDirecthlvestmentandEconomicEnvironment，Boundmills丛a￡mii!些￡鉴望L丛1998l8MultinationalsandtheLocationofhmovationhttp：／／www．wws,princeton．edu／cgi-bin／byteserv．prl／-ota／diskl／1994／9421／942108．P逝19．CabinetofficegovernmentofJapan，TowardTradeandlnvestnlentLiberalization—China’SWTOAccessionedRegionalIntegrationinNortheastAsiaDec．20．200Ihttp：／／www．kiep．go．kr／project／event．nsf／webviewFI／0E107313C000281F49256B410028F6CD／$fite／Japan-paper,PDF20．Jr-Tsungltuang，TheUnequalDistributionofFDIamongChina’SRegionsandIndustries，http：／／www．tsc．nccu．edu．tw／2004conference／JTHuang．pdf21．TaoYang，InvestinChina，http：／／www．oecon．au．dk／一ec020020147／INVEST％201N％20CHlNA．doc22．ASurveyofKoreanCompaniesinthePearlRiverDelta，http：／／www．tdctrade．com／econforum／tdc／tdc030401．htm，7April，200323．Hung—GayFungandKevintlZhang．，FinancialMarketsandForeignDirectInvestmentinGreaterChina，丝．量：S!!a!匹，200124．ChangJaeLee，Major’l'rendsandCharacteristicsofForeignDirectInvestmentinNortheastAsia，http：／／elpf．kiep．go．kr／proiect／reserchdb．nsffwebviewI／6C3E2A7972132D9749256EC300270815／$file／paper(cilee)．pdf25．C，MinHan，Korea’SDirectInvestmentsinChina：Tecbaiology，Experience，andOwnershipFactorsinPerformance，http：／／www．digital．re．kr／haulab／private／％EC％A4％91％EA％B5％AD％ED％95％92竖Eg竖88竖△Q竖基旦竖8￡堑8Q竖旦旦竖!△竖8￡竖旦旦竖85竖旦￡竖星旦竖△￡竖旦S：￡旦!126．LGEconomicInstitntion，Korea-ChinaEconomicCooperation，Aug26，20027 REFERENCEhttp：／／english．19eri．co．kr／economy／domestic／article．asp?grouping=020lOlOO&seq=1．地27．LGEconomicInstitution，HowdoesFDIdifferbetweenChinaandKorea，Sep13，2002bi!P：丝Dg!l北．I鳇j：!!．k!生￡QⅡQ!!Y!!堆￡呈星a§』a盟地!§：箜P2鞋Q女口ing!Q2Q!坦QQ丝§星g=41 A(’KNOWLEDGEMENTACKNOWLEDGEMENTThisthesisistheresultnl、theinspiringandthoughtfulguidanceandsupervisionofmyguideMis．Sun．Butforherthisworkcouldnothavebeencompleted．1thankherlorhavinggonethroughtiledlaftandforhervaluablesuggestions1wouldliketothankallmyfriendsandclassmatesattileDongbeiUniversityofFinanceandEconomicsfortheirinterestandsupportduringtilecourseofmyWOIk，especiallyLiJinhuanfortheinspiringdiscussionsthathavemanytimesclarifiedmyideas．IthankmymotherMrs．HuangMinghaoforherpatienceandsacrificeinmakingmewhatIamtoday．1thankmyhusbandforallsupportandencouragement．IthankthestaffofCentralComputerCentreand1．ibrary，DongbeiUniversityofFinanceandEconomics，fortilesupportextended． 东北财经大学研究生学位论文原创·性声明小人郧重声明：此处所提交的博I／顽上学位论文《jpli“Cl川咀一0LLL姨l鲫j武I》：足木人在导师指导F，在东北财经入学攻读f}4l／{『il)!’上学位j!J{fuJ独立进行研究所取得的成果。捌本人所知，论文。p除已注明部分外不包含他人已发表或撰写过的研究成粜，对本文的研究J：作做iU重要贡献的个人和集体均已注明。小声明的法律结果将完全山本人承担。作卉签名：’疋幺工^¨jlJji娃汐栌Fr7月双|]东北财经大学研究生学位论文使用授权书《1=世^d、。以、d。”{唧L碳如珊翳’b系本人证东北财经大学攻读博士／硕I‘学他期间在导师指导F完成的博十／硕士学位沦文。本论文的硼f究成果¨东，ItN经人学所有，本论文的研究内容，1i得以其他单位的名义发表。本人完全了解东北财经大学关于保存、使月1学位论文的规定，旧意学校保留并向宵关部门送交论文的复印件和电子版小，允许论义被矗阅平¨借阅。本人授权东北则经人学，I叮以采圳影印、缩印或』e他复制于段保存论义，可以公咖沦义的全部或部分内容。作尚签名导!J『lj签名t期：弘咖年f例川F1t瑚：，。吖年，f月，7FI汀一乡一／f文矽