South Korea Analysis and differences with China Economy

South Korea Analysis anddifferences with China Economy


Executive Summary 3

Introduction 4

Physical Environment 4

Population Demographics 5


Conclusion 7

References 8

Appendices 9

Executive Summary

China and Korea areneighboringeastern Asiancountries with similarities as well as differences regardingbusiness environments, trading, manufacturing and so on. Thediversity between the two countries can be exploitedby entrepreneurs with plans forinvesting in either of the countries to maximize their profitsdepending on which sector hey plan to do businessin. Thetwo countries are major trading partners as a result of thedifferencesexisting between them. Inthis document, the focuswill be put on the two countriesto analyzethe differenceand similarities in business environments.

The two countries differregardingthe demographics of their populations. China has almost 50 times thepopulation of SouthKorea,giving the country (China) an upper hand with regards to the laborrequired for production and,therefore, cheapgoods. China’s policies also focus on luring foreign multinationalcorporations to dobusiness with them with little importance put to the local investors.South Korea,on the other hand,has focused more on developing its owncompanies, putting emphasis on technological advancement that hasusually translated intoproducts of higher quality as compared to the Chinese. The geographiccharacteristics of South Korea limit its potential of agriculturalproduction and,therefore, relyon Chinathatis her largest trading partner to acquire cereals and otheragricultural products such as cotton. South Korea is full ofmountains not goodfor farming and,therefore,reliesheavily on the manufactureof electronics as the driver for its economic growth. On the otherhand, the Chinese land is larger and more diverse. China has wet anddry landsthatmake it an agricultural country. In addition to its mineral wealthand other natural resources, China exports agricultural, electronicand mechanical machines with mediumtechnology. Regardinggovernment, Chinais led by one party. South Korea,on the other hand,is a multiparty democracy with more autonomy resting on the people.Ths makes the country favorableto industrial development. Incontrast to South Koreans, China the Chinese are more corrupt, makingit even harder to do business without a connection from thegovernment.

The two countries have somesimilarities regardless,these include their fast growth rate since1992 as a result of good trading policies and technologicaladvancement, although Chinese economy has been growing faster thantheSouthKorean economy. This makes both countries goodtrading destinationsfor foreign investment as a result of the goodtrading environments. The two countries also have a focuson goodtechnology that drives industrial production, making them moreefficient in production.

The aim of this analysis is toshow the similarities and the differences between China and SouthKorea.This analysis should also give investors some insight into thebusiness environments of the two countries and help them makeinformed decisions.

The mission of the project isto help investors and business minded people understand SouthKoreaand china’s business environments in depth to enable themto tap on thepossiblebusiness potentials of both countries.

1.0 Introduction

Concerning aboutthe relationshipbetween the South Korea and China, we could find that the speed ofdevelopment and cooperation scope between two countries has increaseda lot from 1992. In 1992, two countries announced the diplomaticnormalizationand the business progress between two countries had significantchanges. The data of trade about the South Korea and China hasimproved from $6.37 billion in 1992 to $220.63 billion in 2011. (Han, 2012) In this paper, we want to identify the South Korea’sphysical environment, population demographics, government structure,economic system, transportation and communication infrastructure andso on. Because there have many different physical information andmanagement systems between China and Korea, the business operationsof them have significant discrepancies and affect economicdevelopment. Now, China has become the largest trading partner toSouth Korea and South Korea is the fourth largest for China. Basingsome differences between Chinese and Korean, for look, even both areAsians, Koreans always have small eyes, small noses while Chinesehave big eyes, big noses and rounder face for ethnic diversity,Chinese have a multiplicity diversity while the race of Korean isuniform, in the other word, Korean has a mainly one ethnic stock forcultural diversity, Chinese has many dialects such as Taiwanese,Cantonese, Mandarin and so on, however, Koreans just have onelanguage for food features, in South Korea, their food are similaramong different areas including Seoul and other areas, in themeanwhile, because of the diversity of Chinese, there are plenty offood types like Cantonese cuisine, Sichuan cuisine, Shanghai cuisineto satisfy different area’s Chinese people ( February 28, 2014)for sports, Koreans do well in archery while the diving of Chinaperforms outstanding success in the Olympic Game for traffic habits,Korean cars would pay much more careful concern about the pedestrianson the road and let the pedestrians to cross the road preferentiallywhile Chinese should wait the cars go first. There are much moredifferences between these two countries. South Korea and China areboth emerging economics and develop quickly during recent severaldecades, but they are weak in protecting the intellectual propertyrights. However, they have entirely different institution and policymethods. ( BongChoi&amp Williams,2013)Korea prefer to develop high-technology industry and regard thedomestic companies much more important, (Kim,&nbsp1997)on the other hand, China does well in medium-technology industriesand builds many business relationship with foreign countries andrelies on international business development. Between 1996 and 2003,the economy of China grew quicker than Korea. The report says thatthe development of labor force innovation in China has beenincreasing fast, China pay more attention in research and developmenttechnology. ( BongChoi&amp Williams,2013) Wecan see figure 1, that is the differences of the U.S. Patents grantedto these two countries. China got much more patents from the U.S.from 1991 to 2006. China give more concentration on the technologydevelopment and be absorbed in specific technological fields thatmust be an important element which China could exceed South Korea ineconomic development. There are much more differences between them oftheir companies operation. In this paper, we would analyze SouthKorea of their basic environment and discuss those differences whichare compared to China. Forecasting the business development tendencybetween these two countries is one of our mission.

Figure1. Trendsof US patents granted to Korea and China during 1991–2006. BongChoi&amp Williams,2013)

2.0 Physical Environment

When we analyze one country,we must entirely know it’s basic information such as physicalenvironment in order to explore the other deeper aspects. Thedifferent environments would depend on different industries such asagriculture of countries. The effect of climate change to the incomeof farmers is complex. ( Wang, Huang&amp Rozelle, 2010) I researchsome information about China that the terrain distribution andclimate would affect the agricultural types, in addition, it wouldindirectly influence the development of Chinese economic systems. Inthe northern of China, there are most of plains which terrain is openand be suitable to develop high-technology agriculture that couldusing large scaled machinery and advanced management technology, inthe meanwhile, in the southeastern part of China, there are manymountainous regions and hills which doesn’t have large piece ofland, so there is suitable for small scale business. The climate ofmost parts in China also have obvious differences which take animportant rules for improving agricultural systems. Returning toKorea, in 1905, Japan occupied Korea. After World WarⅡ, Korea wasdivided into two parts that southern parts set up a republic whilenorthern part has a communist-style government. ( November 1, 2015)Each part of Korea often binds each other and causes dissension. Inthis part, we want to study the area and climate of South Korea.

2.1 Area

South Korea locates in EastAsia and it is surrounded by ocean such as Yellow Sea and East ChinaSea with 2,413 kilometers coast line. Its coordinates are 37°North,127°East. The land mass of South Korea is about 100,032 squarekilometers and 290 square kilometers is oceans. ( “Geography ofSouth Korea” , 2015) South Korea is divided into four parts becauseof its terrain. In the southwestern, there are many mountains andvalleys in the southeastern part, it is dominated by the NakdongRiver High mountain ranges and narrow coastal plains mainly spreadin eastern region in the western part, there has rivers and rollinghills. ( “Geography and climate”, 2012) The mostpart of South Korea is mountainous that is bad for tilling, so SouthKorea should input grain from China and these terrains also givebenefits to South Korea which dominates Korean to keep comparativestrengths in capital-intensive products. Because of the lack of land,South Korea primarily develops the high-technology industries andexports machinery, electronic materials and so on to China. Comparedto Chinese complex terrain and areas, South Korea with small arealacks for capital goods, law materials and some natural resources. (Economywatch, 2010) On the other hand, the land of China is vast andbroad, in addition, people is numerous and wealthy. The land of Chinais approximately 9,388,211 square kilometers that is more than 5000times to South Korea. Because of the benefit of usable land to beused in cultivation, the agricultural products become a big part ofexports in China. The cheap labor force contributes to export lightmanufactures like clothing, shoes, toys and furniture to othercountries. For the tourism industry aspect, in China, there arespecial economic zone in HongKong border and international tradecenter in Shenzhen where both are the attractive places for travelerto visit. From the early 1980s, the development of tourism in Chinahas been increasing dramatically and affect the economy process. (Bi, Luo&amp Liang, 2011) The reason which contribute to thissuccessful tourism mainly is the various terrains and colorfulcultures among different areas. The development of tourism industryin China would increase the income of local people, tax revenues andso on that affect Chinese economy deeply. Compared to South Korea,their tourism industry is not as mature as China’s but developquickly in recent decades.

2.2 Climate

South Korea belongs totemperate monsoon climate with four distinct seasons. The weather ofSouth Korea is continental climate, but it tends to monsoon climatewhen we consider about its precipitation. Winter is from December tomid-March which temperature is below 0℃ and sometimes has a lot ofsnowfall in January and February. In spring, the temperature staysnearly from 5℃ to 10℃ from March to April and increase a littlelater. People would like to view the beautiful cherry blossom in theparks in April. The weather in summer of South Korea is rainy and hotwhich is accompanied by typhoon period. The period of autumn isshorter than other three season that is from mid September toNovember. It is opposite to summer’s weather that is dry with verylittle rain. ( “Korean Weather,” n.d.) Because of the massiveland of China, the climate of China is highly varied. There are manydifferences between southern parts and northern parts such asprecipitation, the temperature in winter and so on. In China, thereare several climate styles including plateau climate zone,cold-temperate zone, mid-temperate zone, warm-temperate zone,subtropical zone and tropical zone. In the eastern of China, thetemperature is low and it’s suitable for living, so there is lessminerals to output which waste many natural resources. On the otherhand, the weather is hot and suitable for producing grains, by theway, the weather leads to that the period of production is over tenmonths a year. The vast amount of grains to export makes many profitsfor China. America is mainly client and build a long-term consumptionof grains with China. Consider about South Korea, South Korealaunches world’s second biggest carbon consumption country becauseof it is a country with industrial power. ( Valentine, 2015) In orderto control the carbon emission, Korea set up the carbon tax whichincrease the burden of those manufacture companies. ( “Climatechange in South Korea”, 2015) When they produce cars andmanufactures, they would output plenty of carbon dioxides and carbontax would increase their expenses rapidly. So their strong impact ofindustry also make related business problems.

3.0 Population Demographics

Population demographics is astatistical data that introduce the characteristics of the populationand it is directly effects the productivity and economic of thecountry. China is ranked number one in the list of country populationthat China occupied 19.24% of the world total population. Inaddition, South Korea has total population of 50 million which is 28times less than China’s population. First of all, population is abasic statistical data that demonstrate the general information aboutthe distribution of characteristics within the population. Forexample, age and gender. Second, employment status is most effect bypopulation. However, employment rate demonstrate the gross domesticproduct and economic level of the country. Third, health is anotherimportant factor that drives government and industry expenditure onhealth insurance, employee welfare and it is also drives theproductivity performance of the country.

3.1 Employment

Employment status of a nationis directly reflects the economic level of the country in term ofgross domestic product that based on Okun’s law, the increasing onemployment rate will lead to an increase in gross domestic product.Republic of Korea as one of few developed country in Asia, itmaintained a constant low unemployment rate since 1999. As these databelow, they provide a general idea of the employment status andproductivity performance in South Korea. According to StatisticKorea, the average rate of unemployment is 3.63 percent since 1999 to2015 and the unemployment rate is recorded at 3.5 percent atSeptember 2015, the total number of employed persons is recorded26,036 thousand in 2015 which is also the highest record since 1999.(2015). In addition, labor productivities is maintained a significantresults in every industry that 97.5 in non-agricultural sector, 96.8in mining manufacturing and electricity supply industries, 96.1recorded in construction industry and 98.5 in service industry. Beadson Statistic Korea. (2015). Therefore, the employment circumstancesis appeared very stable in South Korea that they have achieved aconstant average of low unemployment rate for a long period of timeand the labor productivity perform an outstanding results even amongdeveloped countries.

China is a developing countryin Asia and the economic has dramatically growth in the recent 20years. Nowadays China has become the world large economic power. Inone hand, employment always being a concerned in China because of thehuge amount of population and competitiveness in labor market. Theunemployment rate in China is similar with South Korea that bothcountries maintained a constant low rate. According to The Ministryof Human Resource and Social Security of The PRC, the averagepercentage of unemployment rate in China is 4.13 from 2002 to 2015and recorded 4.05 percent in the third quarter of 2015, in additionlatest record showed that the total number of employed persons is77,253 tens of thousands in China. (2015). for this reason, there areis no sign of significant difference in term of employment ratebetween China and South Korea. On the other hand, labor productivitygrowth has been remain on top of most other countries, Allan, Mark,Gong and David (2010) found that the average productivity was 2.8percent which is far higher than Unite States and Japan. China’srate was even greater than South Korea which was 2.1 percent.However, the reason of productivity increased dramatically in Chinais because it is started at a very low point. For this reason, theabsolute labor productivity is far behind these countries. Allan etal. (2010) found that the average comparative labor productivity perworker in US dollar is $15,215 in China and $45,478 in South Korea. Thus, the productivity gap between China and South Korea is huge. Inone hand, South Korea is a developed country with sufficientindustrial power among other developed countries and technology isone important of critical forces that disturbing the productivity gapcompare to China. On the other hand, China has just made atransaction from agricultural to industrial country, therefore thereare many critical forces beside technology that drive theproductivity performance which need to be improved such aspharmaceuticals and telecommunications.

3.2 Population

South Korea has population of49.3 million and Seoul as the largest city of South Korea, itoccupied 9.8 million of the total population. The gender distributionis balanced that South Korea last record 50.28 percent of populationare female in 2013. Crude birth rate is ranked 178thin world ranking which recorded 9.413 births per thousand, thereforeSouth Korea facing low birth rate that 14% of its population will beover 65 by 2018. This phenomenon will makes South Korea becomes anaged society. (“Korea Population, 2015”, 2015). Therefore, agingof population will leads to problems for example, decrease inproductivity, labor shortage and increase in government expenditures.Aged society is a common phenomenon along with a country’sdevelopment, some country will take several decades and some willtake a hundred of year.

However, China is facing thesame problem and it is more serious than South Korea because agingpopulation is growing rapidly in China. The total population of Chinais record at near 14 billion at 2014 and the gender distribution isnot balance that 122 boys born for every 100 girls. (“China and theworst-ever, man-made gender gap”, 2013). There were only 5 percentof population aged over 65 three decades ago but nowadays, 9 percentof population is over this age and it continue growing rapidly thatgovernment estimates China will become the world most aged society in2030 that 30 percent of population will be over 65 year old at thattime. (“Population Aging in China: A Mixed Blessing”, 2013).Therefore, South Korea and China are both not the exception, agingpopulation is a common problem in developed and developing countries.In China the rapidly growing on aging population is result by thedramatically growth in economic during the recent years because theaverage life expectancy is increased in a short period of time. Thisproblem will also leads to a decrease in internationalcompetitiveness for both China and South Korea.

3.3 Health

Health status of population isimportant for a country that it is able to bring positive or negativeeffects on government expenditures and economy of the country.However, health status is being well improved as the development ofeconomy in South Korea. Chang Bae.

Soon Yang, Jun Young and SangYi (2009) have found that benefits coverage in 2000s was 60 percentand the number increase to 70 percent in present. Life expectancyhas constantly increased both for women and man, women’s lifeexpectancy was 66.7 year old in 1970 and this number grew to 82.4 in2006 which is much greater than the average life expectancy in theworld. Man’s life expectancy increased from 59.8 in 1970 to 75.7in 2006. In addition, health care in South Korea is provided bynational health insurance. They provide services for every residentin the country is eligible no matter their nationality, thereforeforeigners are receive the same medical benefits as Korean nationals.Government expenditures is a reason that Korean’s life expectancyis being improved. The total government expenditures on health carewas 6.8% of GDP in 2007. However, only 8.79% of the total populationwas covered by the national health insurance system in 1977 but after12 years, the majority of population was covered except 3 percent to4 percent of population but they are now covered by welfareprogramme. (“Republic of Korea Health System Review”, 2009).Therefore, the GDP spent on health care expenditure is relatively lowcompare to other OECD countries however Korean’s life expectancy ismuch higher than world average.

China alsodeveloping a comprehensive health care system as South Korea howeverChinese life expectancy and government expenditure on health care islower than South Korea that women’s and man’s life expectancy areboth 75 years old in China and government expenditure on health carewas 5.6 percent of GDP in 2013 (“Health expenditure, total of GDP”,2013). Inaddition, interm of health care benefits, Chinese national health care offeringthe similar benefitcompare to South Korea. In 2008, 87 percent of totalChinese population are covered by numbers of health insurance, thebenefitcoverage was also 70 percent and the figure is continue increasesince then. (“Universal Coverage of Health Care in China”, 2010).For this reason, Chinaand South Korea are both concentrate on the development of healthcareand it does effect the economy of the nation. In one hand, medicalsecurity is a basic guarantee for people and the development ofcountry, it provide a health and stable social environment and laborproductivity. Therefore people’s life expectancy will be increasedas the development of economy and health care benefits, which willcreate a phenomenon for every developed and developing country whichis aged society and it will decrease productivity and weaken thecountry’s competitiveness in world base. On the other hand, everycountry is trying to solve that problem and increase birth rate is acommon solution. For example, Chinese government had a regulationthat each family only allow to have one child but government haveannounced that the regulation just switch to a two child policy inorder to prevent aging population, which expected to be a seriousproblem for China in 2030.

3.4 Political

Politicalsystem in South Korea is democracy government whichis similar to western countries, the system is support byconstitution, parliament, judiciary and government. In addition,presidency functions are also similar aspresident of Unite States. First, president is the head of state thatrepresent the whole country of South Korea in terms of diplomaticrelations and government system. Second, president has theresponsibility and right to implement regulations and laws thatissued by legislative body. Finally, president is the commander inchief of the armed forces of South Korea and president has the rightin making military policieshowever, presidential tenure is 5 years and it cannot bere-elected.

Since South Korea has ademocracy government, political parties were born in thedemocratization of society. In1998, there were 10 political parties active in South Korea but only4 of them had seats in the national assembly which are The GrandNation Part (GNP), The National Congress for New Politics (NCNP), TheUnited Liberal Democrats (ULD) and The New Party by The People (NPP).However, after several marge and rename, there are 3 main politicalparties in 2015 which are Saenuri Party (SP), New Politics Alliancefor Democracy (NPAD) and Justice Party (JP). (“Politics in Korea”).Consequently, South Korea’s political system is multi-partydemocracy governmentand there are several benefits from this political system, the mostobvious benefits is reduce corruptions. There are fierce competitionbetween parties in multi-party democracy system. Therefore, politicalparties will monitor each other in order to reduce corruptions.However, the means of multi-party democracy system can reducecorruptionsis only comparatively speaking. PERC’s report demonstrates that theplace of South Korea’s corruptions ranking is increased that SouthKorea become the most corrupt developed country in Asia that SouthKorea had precept 6.98 corruptionsin 2013. (“High Korean Corruption Rankings Make Netizens Despair”,2013). Thus, government and business corruptionscan lead to anegative effecton international business especially for foreign businesses whichinterested to enter the market in South Korea because the competitivefairness can be questioned under serious government corruptions.

The political system of SouthKorea is very similar to most of western countrieshowever thereare many differences if compare it to political system in China.Chinese government is one of few governments in the world thatimplement one party rule political system. One of the major issue ofone party rule political system is also government corruption. Thelowest score of corrupt perceptions in China is 6.29 during 2004 to2013 and it has record 7.79 in 2013 and China has more seriouscorruption in every year compare to South Korea. (“High KoreanCorruption Rankings Make Netizens Despair”, 2013). Consequently,thisrelatively serious corruptionsin China makes foreign investments are hard to success in the marketin China. In addition, it brings barrier for domestic business aswell that businessman believe that government connection is much moreimportant than business regulations. However, Chinese governmentinvest a lot of resources to combating corruption in 2014 and itactually effect the economy trend in China. For this reason, peoplestart to consider that crackdown on corruption is already bring anegative effect on Chinese economy, in other word some people believethat corruption can be consider as lubrication for the development ofbusiness and economy in China.

4.0 Economy

Fifty years ago, when SouthKorea was a poorcountry and evendeveloped slower than Bolivia and Mozambique. With the rapiddevelopment of its economy, South Korea exceed New Zealand and Spainwith a higher per capital revenue of about $23,000. In 1996, SouthKorea joined the Economic cooperation and Development which containsmost of rich industrial countries and acknowledge its success to thewhole world. ( Noland, 2014) In next part, I would like to discussthe natural resources, major industries and important tradingpartners of South Korea. The economic problems of South Korea mustcatch global eyes because of the dramaticallyimprovement of its business and total income. The internationalstanding of South Korea has changed enormously in recent decades, astheir important trading partner- China, the trading relationship andoperation differences between them should be researched carefully.

4.1 Natural resources

Natural resources contain manykinds of raw materials and would affect the development of acountry’s economy. Many governmentbegan to transfer from resource-based industries to less resourcesconsumption industries. ( Chang, Wu, Yang, Shi&amp Li, 2014) Eventhough the development economy of South Korea is rapidly increasingin the recent decades, there still exists many difficult problems toblock their income and industries to be advanced. One of them I wouldlike to talk about is natural resources in South Korea. South Korealacks natural resources endowment and most of iron and coal would befounded in NorthKorea. ( Garner, 2008) Once South Korea wants to forest, there wouldresult in lackof trees which is nearby the urbanarea, so the government of South Korea carried out many reforestationprograms to protect their natural resources. ( Clark, 2015) Knowingclearly about the lack of natural resources, South Korea exploresother methods to stimulate economic development and GDP. They concernabout improving the scientific and technological levels to increasethe productive efficiency that would use their natural resourcesmaximum to avoid any wasting. South Korea has a mature capital marketand relyon the U.S. economy which decreases their disadvantages in lacking ofnatural resources and drive their economic development. Compared toChina, the vast land and abundant natural resources brings manyshortcuts for their economic process. Because of a plan economy andthe eagerly desire of increasing gross domestic product, China usethe natural resources with low efficiency and over exploitation whichlead to over consumption of natural resources and many conflictsamong environment, economyand social benefits. ( Chang&amp Wu, 2011) In China, about 96% coalmining is underground mining whichlead to many environment problems such as subsidence. Because of theindustrial development, the depletion of fossil fuels stands almost91% of the energy consumption in China. The shortage of fossil fuelsleads to averageprice of coals rapidly increasing from 2008, ( Chang, Wu, Yang, Shi&ampLi, 2014) which not only pressure many energy industries likeautomobile industry but also affect the economy market in China. Eventhe natural resources of coals and fossils in South Korea are muchless than China, the protection processes of these natural resourcesin South Korea exceed China a lot. Concerning about the long-termeconomic development, even though the natural resources of China areenough now that not means people could use them immoderately. Thefossils and coalsshortage may become a serious problem in China in the future.

4.2 Major industries

For the next part, I wouldlike to research the distribution of industries, and concentrate onhow major industries affect South Korea’s economic developmentcompared to my home country- China. Sine the early 1980s, South Koreabegun to pay attention to develop industries in three main metroareas which is Seoul, Pusan, and Taegu, and led to the rapidincreasing of high wages and land rent cost in initialmetro areas than hinterland cities. ( Henderson,Lee, &amp Yung Joon,2001) It indirectly affects polarization of wealth and the gap ofincome between cities and countrysides becomes more seriousthat decreases the society stability of South Korea. South Koreaconcentrates on develop importantmetro cities economies and put their political and economic center inSeoul where is the capital of South Korea. I found some data fromHenderson, Lee and Yung Joon’s journal article that shows in 1983,South Korea concerned highly in machinery, high-technology andtransport, but with deconcentration on traditional and heavyindustries. ( Henderson,Lee, &amp Yung Joon,2001) South Korea has achieved remarkable success incapital-intensive and technology-intensive industries like steels,semi-conductors,shipbuildingand automobiles, and lead to that many other countries losecompetitive in those manufacturing industries under the internationaltrade. ( Lee, 1995) In China, there are three major industries whichisagriculture, manufacturing and telecommunication service. China isthe largest emerging market economy all over the world with thelargest population and high total economic product. ( Ross, 2015)Since 1996, China has being successful in producing steels, coal,agricultural chemical fertilizers and television sets. For themanufacturing industry, China is the largest producer inmany goods in the world. For example, over 80% air conditioners areproduced by China. The output of cars and many kinds of manufacturesstands the top all over the world, but people spend less money ontheir domestic high-end manufacture products that leads to thedepreciation of Chinese currency and affect the economic market alot. ( Ross, 2015) Comparing the advantages of manufacturingindustries between South Korea, there are many analysis shows thatChina has more materials, cheaper and abundant labor resources,bigger domestic consumption market while South Korea is ahead ofChina about their technological sophistication, the efficiency of percapital productivity, the higher quality of their products and betterbrand power. (Park, 2012) The biggest barrier for China to catch upwith South Korea is their poor product qualities which reputation isbad all over the world, so China must improve their technology andincrease the attitude of their product producing. For servicesindustry, in 2010 study found out that services revenue stands 43% oftotal Chinese production which is a little less than manufacturing.Since the late 1970s, the proportion of service trade to GDPincreased from 2% to 7% which reflect the rapid growth of GDP inChina and is parallel with the share ratio with those developedcountries,and compared to South Korea during their early development stage.(Hejing&amp Whalley,2014) A healthyservices industry could improve the average level of people’seducation, and increases the per capital wealth to sign up apositivedomestic consumption. ( Ross, 2015) From 1986 to 2010, the real valueof service trade in China increased from US$20.26 billion toUS$315.77 billion that about 15 times. ( Hejing&ampWhalley, 2014) Comparedservice trade between South Korea and China, we could see the figure2, about the total economic output, China stands 33.5% while SouthKorea is almost two times than China about the workforce, China has24.6% proportion while South Korea is 62.3% the only similar data isweight of service in trade between these two countries , but Chinastill stands less than South Korea of service weight in the world.Themain key for Korea to do business trade with China for success is touse the strength of China to full their weakness and vice versa, andremove the barrier of trade between them with developing to do freetrade, ( Yoon&amp Kim, 2005) which is a good method to improve bothof their industries.

Figure 2 Service economy trade between China and South Korea


South Korea

Service, % of GDP



Workforce in service



Weight of service in trade



Source:World Development Indicators 2005 for percent of GDP and workforce,IMF BOP Statistics(2005) forservice in trade. ( Yoon&amp Kim, 2005)

4.3 Trading partners

South Korea is the 6largest export country in the world, in 2013, the exports revenuereached at $571 billions and the importsarrived at $494 billions. The data from OEC website proves that thetop five exports products are integrated circuits($56.1 billion),refined petroleum($47.9 billion), cars($43.5 billion), passenger andcargo ships($22.5 billion) and LCDs($22 billion) while the top fiveimports products are crude petroleum($92billion), petroleumgas($33.5billion), integrated circuits($27.2billion), refinedpetroleum($26.8billion) and coal briquettes( $11.6billion). ( “South Korea”, n.d.) A successful international trade isclosely associated with trade partners. The top five exportdestinations of South Korea are China, the United states,Japan, Singapore and Hong Kong while the importantimports are China, Japan, the United States, Saudi Arabia and Qatar.China is the most important trade partner ofSouth Korea including exports and imports. In 2014, the top 10trading partners of Chinese mainland are the United States($521billion), Hong Kong($401 billion), Japan($312.55 billion), SouthKorea($274.24 billion), Taiwan($197.28 billion), Germany($161.56billion), Australia($136.37 billion), Malaysia($106.07 billion),Brazil($90.27 billion) and Russia($89.21 billion). (“Top 10 TradingPartners of the Chinese mainland”, 2014) Now, China has become thebiggest export destination country of South Korea. The trade betweenSouth Korea and China became more flexible and signs of a growingeconomic interdependence between them. Because of theseconnection between South Korea and China, the export patternof them is more and more similar, and China has become a majorcompetitor and challenge for South Korea’s manufactureexports. In the meantime, China has become the most importantexporter and importer for South Korea and expands their bilateraltrade. ( Joon-Kyung, Yangseon&amp Lee, 2006) South Korea mustbalance the benefits and weakness to trade with China. I think thatwith the rapid development speed of economy of China, South Korea mayover rely on Chinese output and their markets. So the change ofChinese economy would influence a large range of South Korea’sbusiness operation and market development. However,the large need for South Korea alsostimulates Chinese companies to produce more and increase the amountof output especially some manufacturing companies.

5.0 Conclusion

South Korea and Chinaare developing economies whose economies have largely relied onmanufacturing and technological advancements. Withinthe past few decades, both countries have increased theireconomic influenceacross the globe substantially as a result of the good tradingpolicies in conjunction with the favorableworking environment and working resources.China, for instance, just as discussed inthe project, has large and demographically diverse populationsthat confer the country a ready domestic market and an availabilityof ready and cheap labor needed to propeleconomic development through manufacturing. China also has vastlands that are diverse and good forfarming, making it a principle exporter of agricultural produce tocountries like the South Korea.The trading policies of China adoptedin 1991 that favor foreign investment isalso friendly to direct foreign investment, thereby attractingmultinational corporations. South Korea incontrast, is a small country with a land mass that isfilled with mountains making it unfavorablefor agriculture. The population is small and,therefore, a smaller domestic market and has less rawmaterials such as iron and forests. Therefore, SouthKorea has invested heavily in technology,making the country more known for better products as compared to theChinese counterparts. The However, due to a several controllable anduncontrollable conditions, both countries some limitations to theireconomic growth. These limitations include in the part of China,a limited democracy as a result of singleparty government. These give the peopleless autonomy that may be useful inbusiness growth. China also has high ratesof corruption stemming from the state oflimited democracy.This makes business people to be inclinedmore towards finding business connections rather that obeyregulations put in place. China’s vast population also causes highrates of unemployment a the country evenwith its high rates of industrialization,can not absorb all the citizens legible for employment as it hasalmost 19 percent of total worldpopulation. The quality of products fromChina has also ruined the country’sreputation and, therefore, manufacturersmay fear to manufacture from the country.On the side of the citizens of china,it is harder for the county’scitizens to conduct business as a result tothe country’s policies favoring foreigndirect investment more that domesticentrepreneurship. South Korea, on the other hand,has limited potential as discussed as a result of its small landmass,small population and inadequacy of natural resources. South Koreaalso favors domestic investment and,therefore, has fewer incentives forforeign direct investment from other countries. From the analysispresented in the paper, it is clear that both countries, despitefacing the limitations pointed out, havemanaged to maintain a continuous trend indevelopment, making a country lie SouthKorea over fromlower levels than Mozambique to one that is more economically stablecompared to Italy. China, on the other hand,is listed among the world’s economic giants that competethe United States of America. It is, therefore,important to note that China is morefavorable for investment as compared toSouth Korea asevident in the inflow of foreign direct investment from the UnitedStates of America between 1996 and 2006.The conditions of China guarantee aprofitable venture, whether it is an investmentbased on agriculture, electronics or mechanics. This is however notto dismiss South Koreaas a good investment destination, butrather to mean that it is just not as competitiveto foreign investment as compared to China.Better policies may improve South Koreasposition while reduced corruption may make Chinaa better destination than it is now.

Reference List

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