Japan's economic advance into China: Meeting of Asia's two giants

Abstract

Since the bubble of its over‐heated economy burst in the early 1990s, Japan has been plagued by the worst post‐war economic recession at home and a steady decline in business competitiveness around the globe. In the face of numerous economic woes of late, Japanese firms are stepping up the internationalization of business by way of foreign direct investment (FDI). And, the main focus of their FDI is shifting from North America and Europe to Asia, China being the biggest draw. By the end of 1993, China, when combined with Hong Kong, pushed Britain aside to emerge as the second most popular destination for Japanese FDI and also Japan's second largest trading partner. Indeed, China is fast becoming a major manufacturing base as well as an important market for Japanese firms. As the balance of the world economic power shifts from West to the East, rivalry between Asia's two giants may intensify. Still, Japan's economic advance into China should hold great many promises for both countries.