Major Determinants of Korean Companies' Foreign Direct Investment(FDI) toward China

The purpose of this study is to analyze factor cost variables by regions in China using the Panel Tobit Model covering 31 provinces, cities and self-governing districts from 1993 to 2006 in order to find out how these factors influence the selection of investment location by Korean corporations in China. Results showed that the regional GDP, regional annual average wage of the laborers and the regional R&D investment scales gave statistically significant influences. Among these, the largest influential factors were the regional annual average of the laborers and the regional GDP by virtue of market scale. However, the road factor, which is the fundamental infrastructure of a society, did not exhibit any statistically significant result. This indicates that Korean companies are not largely influenced by the level of development Of roads when they, decide on foreign direct investment in China. To put it more concretely, Korean companies who launch in the Chinese market do not focus on the domestic market, but instead are mostly oriented towards export.