Research On The Expected Foreign Direct Investment Effects Of Sino-south Korea FTA

Economic globalization and regional integration are both the two prominentphenomenon and trend in the process of the world economic development.However, the WTO multilateral negotiations are long-term blocked and substantialprogress are difficult to be achieved so that many countries in the world are working onbuilding a variety of regional economic cooperation organizations. To establish afree trade area has become an important strategic choice to participate in the process ofeconomic globalization and to resist trade protectionism for many countries.China and South Korea are two major economies in East Asia, economic and tradecooperation has achieved rapid progress and the degree of economic ties has deepened,becoming an important trading partner for each other since the two countries establisheddiplomatic relations in1992. China and South Korea have carried out nongovernmentaljoint study for the early establishment of Sino-South Korea FTA, upgrading tothe official government-industry-university joint research and expecting to enter into asubstantive stage of negotiation. Although this is a complex and difficult process andthere are a lot of issues to be resolved, we believe that positive results will be achievedthrough the joint effort of government and all walks of life of the two countries.This article first discusses the current situation of Sino-Korea economic and tradecooperation from the two aspects of trade and investment development; analyze thefeasibility of building Sino-Korea FTA on the basis of describingFTA development strategies of the two countries and calculating Sino-Koreatrade-related indicators and comparing China and South Korea economic dependenceinternationally; explore the foreign direct investment effects on the basis of analyzingstatic trade effects of building Sino-Korea FTA and econometric research of therelationship of investment and trade, finding out that the foreign direct investment effectsare far less than the trade effects and the impact of FDI are not balanced for them.Sino-Korea FTA will bring very significant investment creation effect for South Koreaand will bring very significant investment diversion effect for China, moreover,Sino-Korea FTA investment distribution effects are analyzed from theperspective of the industrial structure. Finally Sino-Korea FTA prospects are predicted from two aspects of international balance of pay ments and industry structure, proposingrecommendations from three levels of government、business and industry organizations.