I was a little surprised to see South Korea as the Number 1 investor in China. Until recently, Japan had held a strong lead over South Korea.
On second thought it makes sense, historically, Korea has always had its strongest ties to China--a relationship that reaches back eons. In fact, until, the twentieth century and the opening of Korea to the West most of Korea's trade was with China. Interestingly, most of that centuries-old trade was via Korea's "High Road to China" which led to the Yalu River border with China. (see my novel A Yankee in the Land of the Morning Calm: Gold and Rail) Today, similar trade still occurs between China and North Korea.
I also see other factors contributing to South Korea's hefty growth in China (notwithstanding lots of lingering animosity between many Japanese and Chinese).
Foremost, South Korea conglomerates have bolstered their investments in China...these include Hyundai-Kia, LG, and Samsung. I've found that most of these firms have separate teams just dedicated to China. Two forces drive this investment. One is China's cheap labor when compared to South Korea. Second, Korea's conglomerates desire a stronger slice of the Chinese market, especially cars and consumer goods.
Reflecting the trend , many Korean university students (domestic and those studying abroad) are now focusing on Chinese language/ policy skills hoping to position themselves better in the highly competitive South Korean job market...
To conclude, the growing South Korea-Chinese link warrants close attention....
Korea Becomes No. 1 Investor in China
With nearly US$3 billion in investments, Korea has beat out Japan to become the largest investor in China. Citing statistics from China's commerce ministry, the Korea Trade-Investment Promotion Agency (KOTRA) said Thursday that Korea's investments in China for the first 10 months of the year totaled $2.95 billion.
While that amount isn't much compared to the $18.66 billion invested by Hong Kong and the $12.9 billion from the British Virgin Islands, KOTRA said Korea is the largest investor among sovereign states since Hong Kong is part of China and the Virgin Islands are a tax haven drawing investors from around the world.
Japan came in second among sovereign states with $2.81 billion, followed by Singapore with $2.25 billion and the U.S. with $1.99 billion.
KOTRA said Korea is making growing investments in the large market of eastern China. Large Korean high-tech businesses are setting up offices there, too. With China's service market opening even further, investment in non-manufacturing industries is also on the rise. The proportion of Korea's investment in China that went to manufacturing fell from 90 percent in 2004 to 79 percent for the first nine months of the year.