The global financial crisis started in 2008 has changed the world economic order or environments in multiple aspects. The goal of this study is to make an overall assessment of the changes in each aspect after the crisis, to forecast the direction of the further change, and to draw implications for Korea’s international economic policy. This study deals with the topic in four categories: overview of the crisis, changes in global governance, changes in advanced economies, and changes in emerging economies.
In Part I which overviews the crisis, we contrast the recent crisis with the Great Depression of the 1930s from the perspective of comparative history and examine fundamental causes of global imbalances which were an important background of the crisis. Part II discusses the changes in international economic order or global governance created by impacts of the crisis. The changes include the emergence of the G20 as a new international forum, the tendency of financial re-regulation, and the stalemate in international climate change negotiation. This part deals with also the rise of the G2 system as a global political order which was caused by the great resilience of the Chinese economy after the crisis. Part III covers the changes which happened in advanced economies in the post-crisis era. The notable changes are the crisis of the Euro system, widespread fiscal consolidations, and deterioration of economic inequality. Part IV examines the changes in emerging economies. Rapid recovery from the crisis in these economies is contrasted with stagnation in advanced countries. This two-speed recovery from the crisis enhanced the status and proportion of emerging economies. Internally, however, cracks in political order were often incurred as in the Middle East. In East Asia the greater Chinese economy created a substantial change in the regional economic integration framework. In conclusion the prospect of further changes in the world economy and their implications for Korean economy are provided.
The global financial crisis has worked as a momentum to accelerate structural changes which were already under way in the world economy. One of the most significant changes is the shift in the economic gravity from advanced economies to emerging ones. The other is rethinking of economic liberalization or deregulation movements which continued after the 1980s. These changes imply that capitalism requires its reformulation on the basis of new economic and social norms. However, it is highly susceptible whether such reformulations are actually in progress now.
It is also obscure whether a new global economic order is being re-established after the crisis. Although the shift in global economic power toward emerging economies brought about the creation of the G20, the governance seems too fragile and fluid to replace the old global order. Rather, the decline in the US hegemony and heightened tensions between the US and China appear to make global governance more unstable. In addition, regional integrations which were developing encountered a critical moment as shown in Europe and East Asia. Consequently, cooperative global governance seems most unlikely to be built up, reflecting the emerging multi-polar world economic system. The unlikeliness is attributed to the internal weaknesses of emerging economies, particularly China, which should work as a setter of new rules. The weaknesses include income inequality, political risk, lingering inflation, fragile financial system, and so forth. These factors are constraining the capacity or willingness for China to participate in making new global rules. In foreseeable future the world economy will spend time and efforts in managing the problems caused by the crisis with existing global orders dismantled but new norms unset.
Under these prospects for the world economic circumstances, Korea’s economic policy should be aimed at keeping the economic stability against possible external shocks. Particularly it needs to be prepared to absorb the volatile international financial markets and capital flows. As well it has to induce international cooperation in order to resist protectionist trade policies. Korea needs to intensify economic linkages with emerging economies, but also has to be cautious of their political risks. As for the East Asian economic integration, it needs to steadily engage Japan in the integration process and to circumscribe the leverage of China together with Japan.

The global financial crisis started in 2008 has changed the world economic order or environments in multiple aspects. The goal of this study is to make an overall assessment of the changes in each aspect after the crisis, to forecast the direction of the further change, and to draw implications for Korea’s international economic policy. This study deals with the topic in four categories: overview of the crisis, changes in global governance, changes in advanced economies, and changes in emerging economies.
In Part I which overviews the crisis, we contrast the recent crisis with the Great Depression of the 1930s from the perspective of comparative history and examine fundamental causes of global imbalances which were an important background of the crisis. Part II discusses the changes in international economic order or global governance created by impacts of the crisis. The changes include the emergence of the G20 as a new international forum, the tendency of financial re-regulation, and the stalemate in international climate change negotiation. This part deals with also the rise of the G2 system as a global political order which was caused by the great resilience of the Chinese economy after the crisis. Part III covers the changes which happened in advanced economies in the post-crisis era. The notable changes are the crisis of the Euro system, widespread fiscal consolidations, and deterioration of economic inequality. Part IV examines the changes in emerging economies. Rapid recovery from the crisis in these economies is contrasted with stagnation in advanced countries. This two-speed recovery from the crisis enhanced the status and proportion of emerging economies. Internally, however, cracks in political order were often incurred as in the Middle East. In East Asia the greater Chinese economy created a substantial change in the regional economic integration framework. In conclusion the prospect of further changes in the world economy and their implications for Korean economy are provided.
The global financial crisis has worked as a momentum to accelerate structural changes which were already under way in the world economy. One of the most significant changes is the shift in the economic gravity from advanced economies to emerging ones. The other is rethinking of economic liberalization or deregulation movements which continued after the 1980s. These changes imply that capitalism requires its reformulation on the basis of new economic and social norms. However, it is highly susceptible whether such reformulations are actually in progress now.
It is also obscure whether a new global economic order is being re-established after the crisis. Although the shift in global economic power toward emerging economies brought about the creation of the G20, the governance seems too fragile and fluid to replace the old global order. Rather, the decline in the US hegemony and heightened tensions between the US and China appear to make global governance more unstable. In addition, regional integrations which were developing encountered a critical moment as shown in Europe and East Asia. Consequently, cooperative global governance seems most unlikely to be built up, reflecting the emerging multi-polar world economic system. The unlikeliness is attributed to the internal weaknesses of emerging economies, particularly China, which should work as a setter of new rules. The weaknesses include income inequality, political risk, lingering inflation, fragile financial system, and so forth. These factors are constraining the capacity or willingness for China to participate in making new global rules. In foreseeable future the world economy will spend time and efforts in managing the problems caused by the crisis with existing global orders dismantled but new norms unset.
Under these prospects for the world economic circumstances, Korea’s economic policy should be aimed at keeping the economic stability against possible external shocks. Particularly it needs to be prepared to absorb the volatile international financial markets and capital flows. As well it has to induce international cooperation in order to resist protectionist trade policies. Korea needs to intensify economic linkages with emerging economies, but also has to be cautious of their political risks. As for the East Asian economic integration, it needs to steadily engage Japan in the integration process and to circumscribe the leverage of China together with Japan.

Since reform and opening up, China could grow up greatly owing to continuous opening of the market and export-oriented economic development. In particular, processing trade that was a leader of export growth could play an important role at the Chinese economic development owing to the Chinese government's support policy. Since global financial crisis, economic uncertainty at home and abroad increased because of rapid decrease of overseas demand, Chinese Yuan appreciation, rise of wages and raw material price and negative cognition on processing trade, so that export processing enterprises made change of business paradigm from production and export oriented to domestic market.
To enter domestic market in China, export processing enterprises were forced to bear not only enterprise conversion cost but also risk of conversion to domestic market. The processing enterprises that is focused on export business shall pay conversion cost that is needed to investigate domestic market in China and to develop its own brand and to strengthen marketing business. When the processing enterprises does not apply transaction method in domestic market, payment terms and conditions, and entry cost into distribution channels to business management, it shall have very much high risks.
This study was focused on Guangdong province where export processing enterprises were crowded, and investigated export processing enterprises' entry into domestic market to examine success cases and to give strategy to enter domestic market in China and to support by the Korean government.
This study investigated development and policy changes of processing trade in China, changes of business model of export processing enterprises in Guangdong province and entry into domestic market in China by using various kinds of materials. The author interviewed not only business managers who made effort to convert into domestic market or to enter domestic market successfully but also local government officials in China, and gave practical information for businesses. The subject was 10 foreign capital export processing enterprises form Hong Kong, Taiwan and South Korea.
According to this study, the Korean export processing enterprises in Guangdong province was demanded to have business model that could meet actual conditions of the business, and to do R&D and innovate continuously and to make use of support policy of local government actively. And, the Korean government shall give political support for small export processing enterprises in Guangdong province to strengthen monitoring of systematic and non-systematic environment in important regions in China and to give guidelines for entry into the Chinese market and to set up regular channel with local government for keen cooperation.

Since reform and opening up, China could grow up greatly owing to continuous opening of the market and export-oriented economic development. In particular, processing trade that was a leader of export growth could play an important role at the Chinese economic development owing to the Chinese government's support policy. Since global financial crisis, economic uncertainty at home and abroad increased because of rapid decrease of overseas demand, Chinese Yuan appreciation, rise of wages and raw material price and negative cognition on processing trade, so that export processing enterprises made change of business paradigm from production and export oriented to domestic market.
To enter domestic market in China, export processing enterprises were forced to bear not only enterprise conversion cost but also risk of conversion to domestic market. The processing enterprises that is focused on export business shall pay conversion cost that is needed to investigate domestic market in China and to develop its own brand and to strengthen marketing business. When the processing enterprises does not apply transaction method in domestic market, payment terms and conditions, and entry cost into distribution channels to business management, it shall have very much high risks.
This study was focused on Guangdong province where export processing enterprises were crowded, and investigated export processing enterprises' entry into domestic market to examine success cases and to give strategy to enter domestic market in China and to support by the Korean government.
This study investigated development and policy changes of processing trade in China, changes of business model of export processing enterprises in Guangdong province and entry into domestic market in China by using various kinds of materials. The author interviewed not only business managers who made effort to convert into domestic market or to enter domestic market successfully but also local government officials in China, and gave practical information for businesses. The subject was 10 foreign capital export processing enterprises form Hong Kong, Taiwan and South Korea.
According to this study, the Korean export processing enterprises in Guangdong province was demanded to have business model that could meet actual conditions of the business, and to do R&D and innovate continuously and to make use of support policy of local government actively. And, the Korean government shall give political support for small export processing enterprises in Guangdong province to strengthen monitoring of systematic and non-systematic environment in important regions in China and to give guidelines for entry into the Chinese market and to set up regular channel with local government for keen cooperation.

I. Introduction

II. Empirical Regularities and Business Cycle Statistics
1. Empirical Findings on Asian Business Cycles
2. Business Cycle Statistics

III. Terms of Trade and Economic Fluctuations

IV. Durable-Goods Business Cycle
1. Characterization of Korean Durable-Goods Cycles
2. Market-Laddering and Financial Acceleration
3. Analytic Framework for Korean Durable-Cycles

V. Conclusion

References

Appendix

This paper investigates business cycles in Asia. Business cycles in developing small, open countries are different from those in developed small countries. Most interesting characteristics in developing countries are excessive consumption volatilities and strong countercyclical net export. Asia and Latin American developing countries share these characteristics. However, there are also differences in business cycles in both regions. We find that Asia shows less excessive consumption expenditure volatility to output than Latin American countries, and strong countercyclical net exports. More interestingly, the durable consumption is negatively related with net export in Asia (Korea), while Latin America (Chile) shows positive correlation. Moreover durable consumption shows a negative relationship with export and import while durable consumption in Latin America has positive relationship with export and import. We believe that there exist different transmission mechanisms in Latin America and Asia that connect consumption, net exports and export or import. We find that positive terms of trade shock increase the real GDP significantly in the short run for Latin America, but have no significant effects for East Asia. However, response of net exports to the terms of trade shocks is stronger and more persistent in Asia than in Latin America. This paper also present an analytic model that could explain the durable goods business cycles in Asia.
The model can explain durable business cycles in Asia (Korea) which generate strong procyclical durable consumption by the export-income channel with market laddering.

 

While the demand on rare earth resources called ‘the vitamin of industry’ as they are used in various sophisticated and green industries is expected to be on the rise in the future as new growth-driving industries will expand, a war on them is getting more fierce since they are really rare all over the world.
While China, the world’s largest rare earth resources-producing country, represents 97% of the total production in the world, it has failed to fully control them in a unified way, causing excessive development and disorderly competition, severely destroying natural environments in their producing areas, and having no voice in deciding their prices in the global markets due to stiff export competition among domestic companies.
So, the Chinese government has continued to unveil stronger restriction policies like recently limiting their exports in an attempt to have a voice for the global price of rare earth resources by effectively controlling them. In response, major consumers like Japan and the United States lose no time in taking proper measures.
This research predicted the future of the rare earth resources industry by analyzing China’s tightened restriction policies for its domestic industry, the responses of Korea and other major countries consuming them, and private companies’ cases and drew what implications they could have on South Korea. In order to do so, we took a simple close at first of all the characteristics, kinds, and usage of rare earth resources along with their industries as a whole from Introduction to the Second Chapter. In the Third Chapter, we dealt with what is going on in the rare earth resources industries across the world, the volume of their reserves and production, their demand and supply, and their prices. In the Fourth Chapter, we examined the current situations of China’s rare earth resources industries and tightened restriction policies. These restrictions include restructuring, restrictions on production and export, strengthened entry standards, and environment restrictions. In the Fifth Chapter, we looked at the measures of Japan, America, and Korea in response to China’s strategic policies. In case of Japan with no rare earth resources, the Japanese government was pushing hard for securing overseas resources, recycling, and developing alternatives, but the United States, which has domestic rare earth resources, focused more time and energy on developing its local resources. In addition, America along with Mexico filed a suit to the World Trade Organization against China’s restrictions on exporting them and is making positive efforts to diversify its import lines through M&A, bring up related experts, and step up technology cooperation. While the Korean government has taken a variety of steps such as the exploration of domestic resources, the development of overseas resources, the stepping-up of R&D and global cooperation, the expansion of reserves, and the recycled use, it is still slow in working with other countries and has not yet to secure processed technology indispensible to producing those resources. That is why a number of short and long-term efforts should be made. The Sixth Chapter handles private companies’ cases. As for Korea, this research analyzed the case of POSCO, which advance into Baotou in the autonomous province of Neimemggu and the case of Korea Resources Corporation, which make investments in Xian in the province of Shaanxi, and for China, this research analyzed the cases of the two powerful companies, Baogang Rare Earth in the north and Wukuang Rare Earth in the south. Lastly, we made a conclusion based on those analyses and drew the implications it could have on the Korean government and companies.
The implications for the Korean government this research has drawn are as follows. First, in order to prepare for rapidly changing conditions in the world’s rare earth resources markets and satisfy increasing demand at home, Korea should strategically select one or two nations and develop overseas resources as it needs to secure mines. Second, Korea, which is lacking in not only top-class processing technology capable of producing a high value products but technology related to refining and separation fields, should carry out research and developments at home while solidifying international technology cooperation. Third, Korea, which doesn’t have sufficient experts on rare earth resources and any specialists who could bring up those experts, should educate expert manpower through the education course for experts which must be backed up by the R&D designed to develop manpower. Fourth, a resource recycling is needed for reducing green house gas emissions as well as securing rare earth metal resources. Fifth, while Korea should build up an effective information network and fully grasp the cycle of rare earth resources at home, it needs to secure information on the prediction of global supply and demand in the world. Sixth, as completion for global rare earth resources is getting more severe, Korea should cope positively with changes in supply and demand at home and abroad by pushing ahead with strategic reserves. Seventh, Korea should build up cooperation channels among governments.
As far as private companies are concerned, they need to move their production bases to China in order to secure stable supply lines and at the same time they should diversify their import lines. In addition, technology does really matter, so it is self-evident that they should do everything in their power to secure technology given in particular that China, which limits the entry of foreign investment companies for the rare earth resources industry, is encouraging non-Chinese companies to invest in in-depth process and applied fields. Besides, it could be another strategy to circuitously advance into China’s rare earth resources industry by means of stepping up cooperation in the field of green industries with China. The two nations will be able to have a lot of room for cooperation since those resources are an integral material of the green industries and Korea and China are positively growing them as a new industry in a strategic way.

20 years have passed since the Commonwealth of Independent States (CIS) was established in the aftermath of the dissolution of the Soviet Union in 1991. It was initiated by 12 newly independent states, excluding the 3 Baltic republics, in order to discuss issues of common interest and cooperate with each other based on independent and equal status. However, due to the non-binding nature of the CIS, most of the agreements among member states were concluded in vain. Nevertheless, they kept up efforts to form various integration schemes, such as the Customs Union of Russia, Belarus and Kazakhstan. The Customs Union was basically the first successful case of economic integration among CIS countries. The formation of the trilateral union was completed by introducing a common customs tariff on 1 January 2010 and removing internal border controls on 1 July 2011.
The overall GDP of the Customs Union amounted to USD 1,677.5 billion in 2010, or 86% of the GDP of the CIS and 2.66% of world GDP. Since the weight of the three economies in the CIS is considerable, it is expected that the Customs Union will have some repercussions for Korea, as well as its neighboring countries. In addition, increase in membership is likely to have greater impact. Currently, Kyrgyzstan and Tajikistan have applied for membership in the union. At this moment, an analysis of the 2 year-old Customs Union and the search for its implications for Korea has great meaning. Composed of five chapters, this study provides an overview of the developments of economic integration in the CIS region, followed by an in-depth analysis of the main components of the Customs Union and its economic impact on Korea. Based on this analysis, this study puts forward a number of recommendations for Korean policy towards the Customs Union.
With no internal duties, the Customs Union imposes common customs tariffs towards third countries. Only Kazakhstan is granted a five-year transitional period for levying a different customs tariff for some 400 tariff lines. As for external non-tariff barriers, the legal regime of the Customs Union, such as quantitative trade restrictions, technical regulations/standards, sanitary/phytosanitary measures and trade remedies, is based largely on relevant World Trade Organization (WTO) rules. Simply put, the Customs Union is a single market, which shares trade remedies and other regulatory measures. If a product passed, for instance, a sanitary/phytosanitary test of a member country, it is automatically permissible in other member nations. 
Following Russia’s accession to the WTO, the common customs tariff will be aligned with Russia’s bound rates. Also, WTO rules will become an integral part of the Customs Union’s legal system. For now, the regional integration agreements (RTAs) including free trade agreements (FTAs), the existing agreements and documents among the three countries do not provide sufficient details on the Customs Union’s policy concerning RTAs with third countries. Nevertheless, the Customs Union countries have been jointly involved in the FTA negotiation process with CIS countries, New Zealand, EFTA, Vietnam and Mongolia.
Meanwhile, the share of the Customs Union in Korea’s overall trade is relatively marginal, representing only 1.8% (USD 8.4 billion) of exports and 2.4% (USD 10.3 billion) of imports. According to the CGE-model analysis, Korea's welfare level falls by USD 4-6 million. This implies that the ripple effect of the Customs Union on Korea is insignificant. Regarding the impact on industrial sectors, manufacturing of textiles/apparel and automobiles/transportation equipment will shrink slightly, by 0.17% and 0.08% respectively. The effect of the enlargement of the Customs Union in the near future and establishment of the Single Economic Space, a higher form of integration, in early 2012; on Korea will increase. Therefore, the Korean government needs to reconsider its economic cooperation policy towards the CIS region in general and the Customs Union in particular. We recommend the Korean policymakers to take following implications into account.
As the economy grows and consumer incomes rise, demand for imports will also rise. It will also lower common customs tariffs and WTO accession can intensify the trend. All these add up to opportunities for Korean companies to increase their exports to the Customs Union. To fully utilize this chance, the Korean government and industries should jointly develop marketing strategies to diversify exports. In addition, larger membership of the Customs Union can lead to a bigger trade creation effect within the union while trade with non-members would not rise at the same rate. This implies higher costs for market access for non-member countries, such as Korea. For industries that face export reduction, expanding direct investment toward the member countries can offer a solution. Thus, the study recommends Korean companies to increase outward direct investments to the Customs Union in order to compensate for loss of exports.
Regarding investment, the Customs Union has removed a number of intra-state economic and administrative restrictions such as customs control, which will contribute to improvement of the overall investment environment there. Therefore, the Korean government and the private sector should collaborate more closely to study Korea’s competitiveness and the investment climate in the three economies, to extend ODIs to the Customs Union. Briefly speaking, Kazakhstan has a favourable tax system with the lowest VAT and income/corporate tax rates in the Customs Union. However, this is overshadowed by comparatively high transportation costs, which is borne by Korean producers based in the region. In the case of Belarus, investors have developed great interest in the country owing to its cheap labor and real estate, as well as the potential to become a logistical hub between the European Union and Russia. Yet its overall investment climate is quite unsatisfactory. Thus CIS-based Korean companies are advised to consider the possibility of relocating production sites in light of these and other relevant factors, including those stemming from the launch of the Customs Union and future developments (e.g. the common tariff, common market etc.).
Attractive investment sectors for Korea, firstly, in Russia would be consumer goods, transportation and medical equipment, plants business and others. As for Belarus, the promising sectors are IT (software), commercial vehicles, chemicals, potassic fertilizers or construction materials, and agriculture. Attractive industries for Korean investment in Kazakhstan include petroleum refining, petrochemistry, agriculture (inc. livestock), renewable energy, and innovation. Meanwhile, Korea needs not only to boost its direct investment to the countries, but also to make efforts to induce ODIs from Russia and Kazakhstan. ODI from the two countries has been rising rapidly owing to energy export surpluses. Increasing bilateral investment can potentially create good grounds for horizontal investment cooperation.  
After  accession of the Customs Union to the WTO, competition for market entry among other countries will become fierce. That is because the Union ensures reduction of tariff and non-tariff barriers over time and that the legal base of the Customs Union comply with rules for multilateral trade. Particularly, Russia’s entry to the WTO is expected to provide a momentum for revitalization of a Korea-Russia project on the Bilateral Economic Partnership Agreement (BEPA), although it is very likely it will proceed in a new format involving the Customs Union as a whole.

China’s Shandong province is one of the regions where Korean companies have invested most intensively. 36.1% of Korean investment in China is concentrated in this region at the end of September 2011. This is the result of Shandong having the advantage of being close to Korea, making it possible to utilize cheap labor and reduce cost of transport, for many Korean companies intensively engaged in processing trade in China.
However, recently, due to related factors such as increase of production costs such as minimum wages, land price and lack of labor, many companies are experiencing difficulties in management. In addition, due to strengthened environmental regulations, urbanization policy, industrial restructuring policy; a heavier burden has been placed upon most small and medium Korean companies that entered China, most of which are in processing.
As the burden of management increases and production environment degenerates locally, it is required that to assess various investment environment, we need to extricate ourselves from investment information fixated on production costs. Thus, in this study, by focusing on four coastal areas of Shandong (Rizhao, Weifang, Dongying, and Binzhou) which have shown rapid economic growth recently, we attempt to provide information for various aspects concerning investment environment; including industrial policy, production cost, and investment preference of these areas. In addition, based on the analysis, this report also suggests types of businesses which may be suited to investment in each region.
As a result of research of Korean companies in China and also the investment environment of each region, it is possible to suggest the following implications for companies who are trying enter the four coastal cities cited above: First, in order to cope with the quickly-changing business environment, there is need to get out of decision making based on contents of investment incentives suggested by local governments. Second, though the cities are located in the same region, production networks and industrial clusters are different, so emphasis should be on analysis of industrial environment of each (except for information of production cost) when making decisions for investment. Third, after taking into account  industrial policies from each area when making decisions on investment, there should be support policy for relevant industry, direct and indirect.
By considering that most Korean companies in Shandong are small, active support by the Korean government is necessary for medium and small business to move into the area or make new investments, especially,  in the form of information on investment environment of the area concerned. For this, the first thing required would be to investigate and accumulate information for investment environment of prefecture-level cities; there is a great need to pool information dispersed in several institutions together and increase access to information by managing and operating that integrated database. Second, considering that Korean companies entering the Chinese market place greater priority on  producer markets over consumer markets, there is a need to accumulate information related to industrial environments by reducing focus on production costs alone. Third, there is a greater need to reinforce economic cooperation between the central government of Korea and local governments of Shandong. Shandong is an area where Korean companies entered most intensively and have experienced much difficulties due to recent changes in the local business environment. Therefore, the reinforcement of economic cooperation with Shandong would be of enormous help to businesses of Korean companies advanced already, and in this sense, it is possible to say that it will have significant implications in promoting economic cooperation with Shandong, in the context of recent trends to reinforce economic cooperation between Korean government and local governments in China.

After 20 years from the establishment of diplomatic relations between Korea and China in 1992, China became the largest investment destination from as well as the trading partner of Korea. China is the major location of investments not only by large firms but also small and medium-sized enterprises(SMES) in Korea. However, during the recent years the business environments in China have rapidly changed, which poses substantial challenges to Korean SMEs. Hence, we need to better understand the current situation of Korean SMEs'. We select specific region and industry where the Korean SMEs have been operating in China.
The purpose of this study is to suggest implications to both the Korean government and the SMEs which have tried to foster competitiveness, moving beyond production-base building (which mainly utilizes cost advantages), and further to aim at expansion into China’s domestic market. We design this study based on the case studies of Korean manufacturing SMEs located in Jiangsu Province, China.
As a methodological approach, we first define competitive china-FDI enterprises as the enterprises which spent a “reasonably long” period of time in China after the initial investment and which self-assessed that they achieved the expected return. Next, we analyzed the reasons for the location choice (investment in Jiangsu Province), the performance variations, the factors to threaten long-term success for the Korean SMEs in Jiangsu Province. The research had two rounds of field visits between July and September 2011 and the locations included Suzhou, Nanjing, and Wuxi.
Chapter 2 introduces the theoretical background of this study. Chapter 3 examines the status quo for the investments of Korean manufacturing SMEs in Jiangsu Province, and the characteristics of Jiangsu Province as an investment location in comparison with Shandong Province, Zhejiang Province, and Guangdong Province. Chapter 4 illustrates our case studies that consist of labor-intensive, capital-intensive, and knowledge/technology-intensive industries in Jiangsu Province. Chapter 5 discusses how the eclectic model designed by Dunning (1977) is applied to Korean manufacturing SMEs in Jiangsu Province.
Finally, we suggest some implications for the government and the businesses. Korean government is advisable to provide more research service for the Korean SMEs in China, and to continue negotiations with Chinese government in order that the Chinese government should enhance the institutional transparency. As for business, Korean SMEs need to pay more attentions to the localization strategies and the networking with Chinese enterprises. In addition, a complete level of subsidiary autonomy should be guaranteed for further growth in China. Korean SMEs also have to improve human resource management and to actively recruit local employees as sales staffs.

The three countries in Central Asia – Kazakhstan, Uzbekistan, Turkmenistan – are attempting to establish Special Economic Zones and Free Industrial Economic Zones (SEZs hereafter). These countries are setting up SEZs for the purpose of boosting their economies through the development of new industries, as SEZs are widely recognized as effective policy instruments for economic development, especially for countries that are less competitive in manufacturing and high-tech industries.
Three countries share a similar economic picture. Agricultural and mineral sectors are important sectors of their economies. Despite the strong economic performance recently, there is little doubt that Kazakhstan, Uzbekistan, Turkmenistan need to diversify and upgrade their respective industrial structures; for which attracting foreign investment is essential. This is precisely what the three governments want to achieve through operation of SEZs.
Yet though their current economic circumstances may be similar, their SEZs have important differences in terms of industries. The main industries of SEZs in Kazakhstan will be IT, logistics, and textiles. In Uzbekistan, the main industry will be small electronic and consumer products. Turkmenistan’s SEZs will focus on tourism.
Of the three countries, Korean companies have a special interest in the Navoi Free Industrial Economic Zone in Uzbekistan. In particular, Korean Air is participating actively in the development of an intercontinental logistics center in this region.
It is expected that the number of SEZs in Central Asia will increase, all playing important roles in the development of economies in these countries.

Korea has achieved rapid economic growth through export-oriented strategy. As a result, people place high value on exports but have a negative perception on imports. However, it is well known that promoting competition through imports also brings significantly positive economic effects.

We study the effects of market openness on competition structure of the market and how economic effects of the openness vary depending on the market structure and competitive structure. Based on these, we identify whether market openness itself roles as a competition policy, and we draw industry liberalization strategy by exploring in which market structures the effects of market openness are maximized.
For these purposes, we analyze the effects of the openness measured by imports and investments on market structure and market performance using six countries’ industry-level data since 2000. Also we study how differently the effects of the openness depends on market structure and competition structure by using computable general equilibrium (CGE) model allowing imperfect competition assumption.
According to the empirical results for the relationship between the openness and market concentration, foreign direct investment lowers the degree of market concentration, while import penetration’s effect is not statistically significant. This is because market concentration is measured as companies’ market shares, however, import does not increase the number of firms in the market. To explore the effects of trade liberalization on firms’ profit, the equation for profit performance indicators is estimated. The estimation results show that market concentration increases profit but imports lower profit. we cannot find a statistically significant effect of foreign direct investment on profit performance.
We analyze how the effects of openness depend on market structure by using a imperfect competition CGE model. If there is a severe product differentiation, the effect of openness measured as real GDP growth rates is relatively small. If the technology of an industry has economies of scale, the effect of openness is very large because of a decline in average cost of production. Especially in an oligopolistic market, the effects are from 2.5 to 6 times larger than other market structures because of the presence of excess profit.
Also we study the effect of openness in the case where the openness affects the degree of competition in an oligopolistic market. if the degree of competition increases by 10 percent due to trade liberalization, real GDP growth rate increases by 4.63 percent. As the degree of competition is intensified, real GDP growth rate increases.
Based on the results, three policy proposals were drawn. First, in the case of Korea, the competitive structure improvements by trade liberalization have been relatively minimal. Thus, more active policy efforts toward trade and investment liberalization are required in order to increase domestic consumers’ welfare and the degree of competition. Also industry-differentiated liberalization strategies should be made by taking competitive structure and characteristics such as technologies into the consideration. Because particularly in industries with an oligopolistic market structure, the effect of openness is expected to be greatest, the effort to open these industries should be considered. Opening by itself can serve as competition policy, but institutional complements is also required to promote and enhance competition through trade liberalization.