Implications of Korean foreign direct investment in China on its trade balance : Evidence from Korean subsidiaries survey data

In this paper, we use survey data on the activities of Korean subsidiaries operating in China and analyze the implications of Korean FDI in China on its trade balance. In doing so, we take into consideration not only trade that is directly induced by the activities of the Korean subsidiaries, but also trade that is replaced by them Based on the survey data, we find that Korean FDI in China directly brings a trade surplus of $756 million with respect to China, but, when considering any replacement of trade with China as well, that surplus is reduced to $312 million Moreover, on top of this surplus, if we add any replacement of trade with the ROW by the Korean subsidiaries' activities, it turns out that the overall Korean FDI in China brings a trade deficit of $1,060 million. Our findings suggest that when we assess the implications of Korean FDI in China on its trade balance, it is important to consider not only its direct effects but also any indirectly associated effects.