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New Act and New Role: Recent Changes in Korea’s International Development Cooperation
KIEP Opinion New Act and New Role: Recent Changes in Korea’s International Development Cooperation

In November 2020, the fully amended Framework Act on International Development Cooperation came into force. Since its first enactment in 2010, the Framework Act has functioned as a legal basis for the Korean ODA system, with this revision coming 10 years into its operation. The core contents of the revised Framework Act aim to further strengthen the authority and role of two major implementing ministries, that is, the MOFA and MOEF, and embassies in partner countries, centering on the Committee for International Development Cooperation (CIDC). It is hoped that Korea's ODA will truly grow in its effectiveness as the CIDC becomes an ultimate decision-making body in the planning and budgeting process. There are three points to be considered for this. First, the CIDC should not micromanage individual projects but focus on more comprehensive, national-level strategies such as the Strategic Plan and CPSs. Second, strategic evaluation must be performed, based not on the results of individual projects but on the outcomes and indicators developed for the strategies in advance. Third, global development agenda must be identified to present strategic directions. The CIDC needs to come up with a strategic direction for matters in which no ministry in charge has been specified, such as responding to COVID-19 in developing countries.

Jione Jung
Changing Environment for Opening of Chinese Financial Sector and Implications
World Economy Brief Changing Environment for Opening of Chinese Financial Sector and Implications

The opening of China's financial sector has progressed at a very slow pace, unlike the manufacturing and trade sectors that have pushed for an active opening to the outside world. The Chinese economy has been growing rapidly while serving as a global production base, but since 2012, it has become necessary to modify its approaches to achieve growth as it enters an era of medium-speed growth. Recently, new reform and opening measures have been taken in various fields to improve the quality of the Chinese economy, and the need for reform and opening in the financial sector has also increased. Internally, the financial system centered on China's state-owned commercial banks has focused on indirect financing, which has served as a major obstacle to upgrading China's economy and industry to the next level, further increasing the need for reform and opening of the financial sector. Moreover, externally, the U.S.-China conflict which began in earnest in 2018, is applying strong pressure toward reform and opening in China’s financial sector. The Chinese government began to show a proactive attitude toward financial opening amid such internal needs and external pressure, and an important development was seen in China’s financial opening when President Xi Jinping declared further opening measures at the Boao Forum in April 2018. The Chinese financial authorities have prepared follow-up measures related to financial opening, and the Chinese government’s efforts toward financial opening in the three years from 2018 to 2020 yielded more results than the ten-year opening period since its accession to the WTO. Against this backdrop, this study examines the main contents of China’s financial opening process, which has been accelerating recently, and derives evaluation and implications.

Sangbaek Hyun, Suyeob Na, Youngsun Kim, Koun Cho and Bongkyo Seo
Study on the Changes in China's Industrial Policies and Industrial Structures in Manufacturing Sector after China's Reform and Opening
World Economy Brief Study on the Changes in China's Industrial Policies and Industrial Structures in Manufacturing Sector after China's Reform and Opening

As China's recent industrial advancement has changed the trade structure between Ko-rea and China from a complementary relationship to a more competitive one, the need for research on Chinese industrial policy has increased. Therefore, this study aims to analyze and evaluate changes in major industrial policies and industrial structures following China's reform and opening. We also analyze changes in the trade structure between Korea and China due to changes in China's industrial structure. Based on these analyses, we propose the following policy implications for Korea. Under the U.S.-China trade friction, China is expected to focus on a powerful science and technology strategy, promotion of the digital economy, "new infrastructure" construction, and the China Standard 2035 strategy. Korea needs to diversify its export market in the information and communication technology sector, prepare Korea's industrial technology protection system, and expand its participation in China's domestic market while diversifying global supply chains. Second, a response strategy is needed considering China's import growth rate in advanced manufacturing and to improve Korea's trade competitiveness. Finally, China's industrial policy is expected to evolve from simple incubation measures to a comprehensive strategy brought into harmony with the market, and further research on the creation of Chinese industrial ecosystems through policy and interaction between companies is expected.

Wonseok Choi, Pyeongseob Yang, Jinhee Pak, Joohye Kim, Jiwon Choi and Xinwang Zhao
Will governance solve the inequality problems surrounding COVID-19 vaccines?
KIEP Perspective Will governance solve the inequality problems surrounding COVID-19 vaccines?

Decameron, a collection of tales by Giovanni Boccaccio, is an entertaining series of one hundred stories written in the wake of the Black Death. The stories are told in a country villa outside the city of Florence by ten young noble men and women who are seeking to escape the ravages of the plague, the Black Death, that hit Europe in the 14th century.

Heungchong Kim
China’s FDI in Europe and Europe’s Policy Response
World Economy Brief China’s FDI in Europe and Europe’s Policy Response

China’s investment in the European Union (EU) increased significantly during the European financial crisis, but has been on the decline in recent years. The surge of Chinese investment has raised concerns and demands for analysis on the negative effects it could have on the EU companies and industries. In this context, the present study aims to analyze the main characteristics of Chinese investment and M&A in Europe, major policy issues between the two sides, the EU’s policy responses, and prospects of Chinese future investment in Eu-rope, going on to draw important lessons for Korea. To summarize the main characteristics of China's investment in Europe, the study found that the EU's share of China's overseas direct investment has continued to increase until recently. Second, investment in the Central and Eastern European Countries (CEECs) is gradually increasing, although it is still insignificant compared to the top five destinations in the EU: Netherlands, Sweden, Germany, Luxembourg and France. Third, China's investment in the EU is being made in pursuit of innovation in manufacturing and to acquire high-tech technologies. When it comes to China's M&A in Europe, the study found that the proportion of indirect China's M&As (via third countries (e.g. Hong Kong) or Chinese subsidiaries already established in Europe) was relatively higher than direct ones. Empirical factor analysis of investment also shows that China's investment in the EU is strongly motivated by the pursuit of strategic assets. Other factors such as institutional-level and regulatory variables are found to have no significant impact, or have an effect contrary to expectations. This suggests that China's investment in the EU is based on the Chinese government's growth strategy, and accompanies an element of national capitalism Today, It is highly expected that the COVID-19 pandemic will have a reorganizing effect on the global value chain (GVC) and Foreign investment regulation in the high-tech sector motivated by national security is emerging as a global issue as the US and the EU are tightening their control. As Korean companies are not free from the risk of falling under such regulations, a thorough and careful response is required. And for the Korean government, it is necessary to prepare legal and institutional measures regulating foreign investment in reference to the US and the EU.

Pyoung Seob Yang, Cheol-Won Lee, Suyeob Na, Taehyun Oh, Young Sun Kim, Hyung Jun Yoon and Yoo-Duk Ga
Labor Market Impact of Immigration in the European Union
World Economy Brief Labor Market Impact of Immigration in the European Union

Immigration is one of the factors often considered as the causes of Brexit. Researchers find evidences that regions with more immigrants from the new member states of the European Union (EU hereinafter) in eastern Europe tended to vote more in favor of Brexit in the 2016 referendum. Similar relations between the size of immigrant population and anti-immigration attitudes or far-right voting are found in other richer EU member states. A common explanation for this relation is the concern that immigrants negatively affect the outcome in the host labor market. Immigration is drawing attention in Korea too. Although immigrants' share in population is still substantially smaller in Korea than in the EU, its increase is noticeable. Also, certain industries in Korea are known to be already heavily reliant on immigrant labor. Recently, as entry into the country was tightened due to the COVID-19 pandemic, firms and farms are reported to have faced a disruption in production. This trend of increasing presence of immigrants in population and in the labor market, vis-à-vis the low fertility rate and rapid aging in Korea, is raising interest and concern on the socioeconomic impact of immigration. To offer some reference for the debates related to immigration in Korea, KIEP researchers (Joe et al. 2020 and Joe and Moon 2021) look at the EU, where immigrants' presence was much higher from much earlier on, and where the greater heterogeneity among the immigrants allows for richer analyses. This World Economy Brief presents some of their findings that are salient for Korea.

Dong-Hee Joe
Analysis of Competition Policies between U.S. and EU in the Era of Inter-Industry Convergence
World Economy Brief Analysis of Competition Policies between U.S. and EU in the Era of Inter-Industry Convergence

In the era of inter-industry convergence, abuses of substantial market power by large digital platforms such as Google, Apple, Facebook, and Amazon, and their increasing number of acquisitions towards small- and medium-sized tech-firms suspicious of eliminating potential competitors are recent representative issues in the ICT sector. Alternative competition policies have been discussed to effectively deal with those firms’ anti-competitive behaviors in a changing environment of competition such as a digital platform economy instead of traditional policies. In this regard, we examine the U.S. and EU competition policy responses to ICT firms’ anti-competitive behaviors in order to provide policy implications to our competition authority. According to our case studies, the U.S. and EU competition and legal authorities consider characteristics of the digital platform economy when they conclude whether firm behaviors are anti-competitive. Furthermore, we find that Facebook's acquisition of WhatsApp leads to a tipping effect and harms market competition. Given these results, we suggest that our competition authority has to consider the balance between innovation and competition when they implement competition policies in the era of inter-industry convergence.

Gusang Kang, Yungshin Jang, Taehyun Oh and Jeewoon Rim