Japan's Role in China's Economic Transformation Since 1978

Abstract

Since the initiation of the open door policy in 1978, the Chinese leaders have sought trade with and investment from advanced countries, including Japan, which has been a major trading partner since the 1960s. Much of Japan's investment to date, however, has been indirect, through govern ment loans for sectors like infrastructure. Major Japanese manufacturers are just beginning to invest heavily in China. In their relationship with China, the Japanese have the advantage of shared cultural heritage, geographical proximity and economic complementarity. In addition, in order to effect the transition from a command to a market economy, the Chinese have sought to follow, where appropriate, Japanese practices in such areas as enterprise reform, taxation and the training of managers. Japanese investors are encouraged by low labour costs and a growing Chinese domestic market but inhibited by such factors as low skill levels and poor infrastructure. Finally, China and Japan are set to become major players in the A...