Investment flows from China to South Korea surged 374 percent last year to $631 million as Chinese companies moved to expand their presence and options in the global market.
The figure was announced on Monday by the Mergermarket Group, a Financial Times-owned consultancy.
Wang Zhile, a senior researcher on foreign investment at the Chinese Academy of International Trade and Economic Cooperation, a think tank of the Ministry of Commerce, said that the rising investment was driven by anticipation of the China-South Korea Free Trade Agreement and the implementation of direct yuan-won currency trading.
Minister of Commerce Gao Hucheng said earlier this month that China and South Korea will officially sign a bilateral free trade agreement in the first half of this year.
Chinese companies' enthusiasm for South Korea has continued this year. Anbang Insurance Group invested $1 billion in February to acquire 63 percent of Tongyang Life Insurance Co, a South Korean insurer, in the biggest single transaction so far between the two nations.
As the yuan has been increasingly used in global trade and investment by countries such as the United Kingdom, Germany and France, the People's Bank of China and the Bank of Korea signed a memorandum of understanding last year to facilitate bilateral investment and trade by reducing transaction costs and exchange-rate risks.
Wang said that the focus of Chinese outbound direct investment in South Korea is still the real estate sector. Chinese investors have become the biggest foreign buyers' group in South Korea's Cheju Island thanks to the country's changing investment immigration policies.
Sang Baichuan, director of the institute of international business at the University of International Business and Economics in Beijing, said that Chinese companies are eager to acquire technology and expand their market share. As a result, their investment in South Korea is moving into such sectors as information technology, machinery, food, biotechnology and vehicles.
More than 2,050 Chinese companies had been established in South Korea as of Dec 31, and the number is expected to rise to 2,300 this year, the China International Chamber of Commerce estimated last month.
Tourism is booming as well, inspired in part by the popularity of South Korean films and TV programs. The number of Chinese tourists to South Korea rose 58 percent last year to 6.1 million.
"China's ODI and the purchasing power of tourists have to some extent helped South Korea avoid a strong currency and supported the country's exports and service industry," said Sang.
