Earticle

The purpose of this paper is to analyze an economic effect of cross FDI between Korea and Chian on exports and imports. This paper proceeds as follows: In section Ⅱ, cross FDI between from 1988 to 2007 between Korea and China is reviewed. In section Ⅲ, the three regression models are built. In section Ⅳ, empirical work is conducted to find out an economic effect of manufacturing outward FDI on exports. I found the variable of Korean outward manufacturing FDI in China is positive and statically siginificant but Chinese outward manufacturing FDI in Korea is not statically significant. I presume the reasons that the effects of outward manufacturing FDI on exports in two countries are different, as follows. Korean outward FDI in China is production- efficiency oriented but Chinese outward FDI in Korea is advance technology acquiring oriented. So Korean outward FDI in China causes intra-industry trade and Chinese outward FDI in Korea is not. But Korean exports of parts to China is decreasing due to local content policy of China. The characteristics of Chinese outward FDI in Korea will be changing to market-oriented and Chinese exports of parts in Korea may be increase.