Korea’s Direct Investment Influence In The Industry Trade Between China And South Korea

With the rapid development of globalization, international trade, as a kind ofancient transaction form, has become one of the main carriers of today’s internationaleconomic relations. In1992, China and South Korea established diplomatic relations.Since then, the trade between China and South Korea has been developing quickly.Trade relations between China and South Korea are inseparable; the main investmenttarget of South Korea is China. At the same time, the important direct investmentsource of China is South Korea. In trade relations, the performance of intra-industrytrade is very important. Therefore, the research of intra-industry trade between Chinaand South Korea has a very important theoretical and practical significance for thefuture development of China and South Korea.The paper summarizes the mechanism that international direct investmentspromote intra-industry trade, and then it carries out a detailed analysis about Koreandirect investment. Although the diplomatic relations of China and South Korea hasbeen a long time, the trade between China and South Korea is also based on resourceendowments differences. In other words, the intra-industry trade is still at apreliminary stage. Through econometric analysis, it is well known that Korea’s directinvestment is the main factor for the industrial products trade development. Finally, itbrings a lot of practical countermeasures and suggestions for the future tradedevelopment. China and South Korea should develop to a higher level of investmentfield in order to promote the development of intra-industry trade in China and SouthKorea.