Trade and Investment between China and South Korea: Toward a Long-Term Partnership

This paper examines the effect of China's rapid economic development on the Korean economy through trade and investment linkages. It shows that China's export structure has converged to that of Korea with its exports displacing Korean exports in third-country markets while the bilateral trade between the two countries has expanded rapidly. The paper points out that the displacement of Korean exports by exports from China is partly due to exports from Korean affiliates in China. It concludes with ideas on how Korea will have to respond to China's rapid industrialization to sustain its own economic growth: