South Korean Foreign Direct Investment And The Implications For China

From 1962 to 1990, the per capital GDP of the Republic of Korea had grown for 123 times. Its development was regarded as"East Asian Miracle"together with three other East Asian countries and regions including Chinese Taipei, Singapore and Chinese Hong Kong. Korea's economic development showcased typical features of"East Asian Miracle". The government had close connections with the chambols. It set the direction of economic development and adopted the strategy of export-oriented economy. This strategy was also used in foreign direct investment. This paper tries to explore the main features of Korea's FDI and provide suggestions for China. China's economic development followed the path of"East Asian Miracle". China had similar situations with Korea and adopted parallel strategies.The features of Korea's FDI include great support from the government, close connection with the world market, the rising of a number of chambols and their global strategy. However, due to the incomplete domestic market mechanism and too much intervene to the company affairs by the government, Korea's companies'strategic advantages still fall behind the European and American companies. Chambols expanded carelessly thanks to its special relations with the government. They were even too heavy-indebted to close down.The long-term export-oriented development strategy also left Korean companies too much reliance on the international market. Korea's FDI was more of a defensive instead of proactive nature due to the irreversibility of economic strategy. Therefore, their competitiveness in the international market was also weakened.China can learn the experience and lessons from Korea, taking advantage of both the international and domestic markets and resources; using domestic market as the bases for innovation and experiment fields in the process of foreign direct investment and exploring technology-seeking FDI as a late-comer. The government should limit its interference to the market and further improve the management mechanism and backup system of FDI. Chinese companies should also adopt global strategies and realize a mutual construction between international running of business and global brands.