Abstract
This study explores the impact brought by political relation between South Korea and China on economic cooperation between South Korea and Shandong Province of China from regional view. Based on the data over 1998–2017 periods, ADF test, LS methods and Granger Causality Test are employed. The results indicate improved political relation is beneficiary to both the increase of export of Shandong province to South Korea and the import of Shandong province from South Korea. But there is no evidence that the bilateral political relation has effected on the FDI from South Korea to Shandong province. There is no evidence that more close economic connections between two regions are likely to be less influenced by political relation.
Highlights
With the development of global economy integration, world trade and FDI have grown rapidly
Many factors influencing trade and FDI, including political relation, have draw great attention of researchers.“Trade brings peace” is a claim embraced by liberal political economy since the 19th century,though some scholars challenge this claim directly and others argue that contingencies and boundary conditions still need to be specified
More than 47% South Korea FDI located in Shandong Province in 2016, and the total dyadic trade volume accounted for about 11.4% of the total trade volume of Sino-South Korea in 2016
Summary
With the development of global economy integration, world trade and FDI have grown rapidly. Many factors influencing trade and FDI, including political relation, have draw great attention of researchers.“Trade brings peace” is a claim embraced by liberal political economy since the 19th century,though some scholars challenge this claim directly and others argue that contingencies and boundary conditions still need to be specified. China has close economic relations with South Korea. The FDI from South Korea to china reached USD4751.12 million in 2016, but the FDI decreased during 2009-2013. Due to the natural geographical advantage, Shandong Province was the most favorite destination of South Korea FDI, and the most closest trade cooperative region in China. China and South Korea remain good ties for a long period, but the ties were considerably undermined by the THAAD isssue since February in 2017, the economic ties have been affected . Whether close economic connections between two parties can decrease the influence brought by political relation effectively is a worthy research issue
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