The purpose of this paper is to identify the major effects of South Korean FDI to China on their bilateral trade. The paper investigates the influence of South Korean companies investing in China for processing trade. South Korean FDI has positive effects on bilateral trade, especially on exports to China. Meanwhile, processing trade plays a significant role in bilateral trade, and has been chiefly responsible for China's trade deficit with South Korea. It is notable that Korean FDI in China is closely associated with export-oriented processing and assembly industries with labor-intensive characteristics. Now confronted with overall economic internationalization, making better use of foreign capital and optimizing the export structure is an urgent task for China. China should work to develop goods that have a competitive advantage, support top export enterprises and increase the export volume of machinery, electronics, and high-tech goods. The Chinese government should enthusiastically encourage Korean companies to invest in and build a foundation for the export of high-tech goods to achieve this.

Executive Summary
I. Introduction

II. Trends and Characteristics of South Korean FDI in China

III. The Influence of South Korean FDI on Bilateral Trade
1. Bilateral trade between China and South Korea
2. The complementarity of Korean FDI and bilateral trade

IV. The Influence of South Korean Companies Investing in China on Processing Trade
1. Trade with South Korean enterprises that invested in China
2. Processing trade plays a significant role in bilateral trade
3. International trade through Korean FDI-processing trade

V. Strengthened Cooperation in Trade and Investment between China and South Korea
1. China should adjust the direction of investment cooperation and optimize its trade structure
2. The need for the two countries to strengthen closer economic cooperation to increase FDI and trade opportunities

VI. Conclusions

References