한국 중소기업의 대 중국 직접투자에 관한 연구

Abstract

Korean foreign direct investment(FDI) to PRC(People’s Republic of China) has been increased drastically since the relation between Korea and China was recovered in 1992. As of 2003, when it comes to the investment to China in numbers and in amounts, Korea is ranked as one of the 5 leading countries which consists of, so called, the advanced countries including USA and Japan.

Several ‘stylized facts’ are found, based upon the related articles and data.

Firstly, most of Korean FDI to China is being made by small business companies which have conducted the small sized investment below a million dollar. Secondly, The FDI concentrates on specific areas such as Shandung Province(山東省)and 3 provinces which is located in North-East area. The vicinity to Korean peninsular and Korean- Chinese contribute to attract this FDI.

Thirdly, Korean FDI focuses on producing labor intensive goods which takes advantage of lower wage than Korean one. Fourthly, Korean investor prefers single ownership to partnership. And a few problems which should be solved are also posed as follows. As a whole, the Korean firms earn relatively low yield rate. They have a strong tendency to just utilize the lower wage condition, not considering other factors-information about Chinese market, cultural and institutional differences. Even though FDI increases very rapidly, on the other hand, the number of bankrupt firms also goes up.

My question is what makes firms bankrupt. It shouldn’t be expected to happen if FDI were rationally decided. In order to make an explicit explanation, I build up an analytical model in the premise that every firm makes decisions to maximize its profits. Total cost is usually composed of production cost and transaction cost. A major assumption in this model is that a firm decides its planned(expected) quantity, which is determined when firms maximize the expected profit, considering only its production cost while it perceives the real transaction cost, beginning to produce goods. Then the real quantity, which is determined when firms maximize its profit after investment, is always underestimated in comparison with the planned quantity. This discrepancy between the planned quantity and the real one leads to excess capacity the investing firm should keep. The firms end up to go bankrupt when the real quantity is zero. So the more firms perceives the transaction cost before investment, the less firms will keep excess capacity and go bankrupt.

This model shows that lack of information about transaction cost on deciding investment causes the Korean small sized companies to go bankrupt. So in order to prevent firms from going bankruptcy, it is suggested that the information about Chinese market should be created by the government or government related institutes and be provided as a public good.