Economic Developments of Korea and China: Focusing on Role of FDI

Abstract

There are many similarities as well as di??erences in the pasteconomic development experiences of Korea and China. Theyare similar to each other in the sense that they have adoptedever, one area that shows clear distinction is the way they haveaccumulated capital. Unlike Korea, the high domestic saving ratiohas enabled China to achieve its economic development withoutinvestment (FDI) is di??erent. First, the contribution of FDI incapital formation of Korea has been negligible, while FDI had ac-counted for more than 10% of the total capital formation of Chinacame from advanced nations, more than23 of FDI into China camefrom ethnic Chinese rms of Southeast Asia. Also, Korea has at-tracted more FDI into commerce industry than China did, andreal estate and constructionindustries than Korea did. From a simple regression, it was foundthat the determinant factors behind the FDI in°ow into Chinacoincide with the theoretical hypotheses, while it was not quite true in the Korean case