Trade, Investment and Economic Interdependence between South Korea and China *

The Korean economy has been significantly affected by the emergence of China. It is now the largest market for Korean exports and a major supplier of its low-cost imports but has at the same time become a serious challenger to Korea in the world markets for manufacturing exports. This paper investigates changes in China's export structure and its effect on Korea, and bilateral trade between the two. It also examines the motives for Korean investment in China and its effect on bilateral trade and cross-border production networks. Copyright 2006 East Asian Economic Association and Blackwell Publishing Ltd..