Japanese Direct Investment In China Research Articles

Economic and Political Factors for the Fall of Japanese Foreign Direct Investment in China

Japanese direct investment in China fell sharply in 2013 and 2014. Both political and economic factors contributed to the fall. Political tensions between the two countries greatly exacerbated China risks as perceived by Japanese companies and dampened their confidence of investing in China. Additionally, China has lost its competitiveness of attracting export-oriented Japanese FDI because of the cumulative appreciation of the Yuan and rapid wage growth.

The impacts of Japanese direct investment in China on the Sino‐Japanese bilateral trade

PurposeThe economic linkages between China and Japan have been strengthened through both trade and Japanese direct investment in China for past decades. The purpose of this paper is to investigate the impacts of Japanese direct investment in China on the Sino‐Japanese bilateral trade.Design/methodology/approachAn index, RRCA, was used to illustrate the changes of relative comparative advantage of major products, and AR(p) models used to examine the effects of Japanese FDI on both Chinese exports and Chinese imports.FindingsThis paper shows that Japanese direct investment in China has contributed not only to the increase of Chinese exports to Japan, but also to the increase of Chinese imports from Japan. This suggests that that the relations between Japanese direct investment in China and the bilateral trade are complementary.Research limitations/implicationsThe sample size used in the empirical studies in this paper is very small. In addition, the studies focus only on the effects of FDI on trade while the effects of trade on FDI are neglected.Originality/valueThis paper provides evidence that Japanese direct investment in China is an important determinant factor of the rapid growth of the bilateral trade. It also shows that the appreciation of RMB against Japanese Yen is associated with a decrease in Chinese trade surplus in the bilateral trade.

Foreign Direct Investment and China's Bilateral Intra-Industry Trade With Japan and the US

This paper analyzes dynamic changes of China's intra-industry trade with its major trading partners, Japan and the US, from 1980 to 2004. It also investigates to what extent foreign direct investment promoted intra-industry trade. The empirical results show that, while shares of China's intra-industry trade with both Japan and U.S rose substantially, its intra-industry trade with Japan has reached 35 per cent of the overall trade, considerably larger than 10 per cent with the US. Sino-Japan intra-industry trade concentrated in the electrical and machinery sectors accounted for 52 per cent and 46 per cent of overall trade respectively. On the other hand, it is in the chemical and food sectors where intra-industry trade represented a relatively large proportion of Sino-US trade, 50 per cent and 30 per cent accordingly in each sector. In addition, the analysis indicates that Japanese direct investment in China performed a significant role in enhancing intra-industry trade between Japan and China. However, it found no evidence that the US direct investment in China contributed to the growth of the bilateral intra-industry trade between the two countries.

Why is China so attractive for FDI? The role of exchange rates

Abstract This paper argues that China's exchange rate policy played a critical role in its FDI boom. Devaluation of the Yuan (Renminbi) and the policy of pegging the Yuan to the Dollar both improved China's competitiveness in attracting Foreign Direct Investment. Examining the hypothesis in the context of Japanese FDI for nine Chinese manufacturing sectors from 1981 to 2002, the empirical results show that the real exchange rate between the Yuan and Yen is one of the significant variables determining Japanese direct investment in China. The devaluation of the Yuan substantially enhanced inflows of direct investment from Japan, and the response of FDI to the change of the real exchange rate is elastic.

Spatial determinants of Japanese FDI in China

Research on foreign direct investment in China has spawned an increasingly large literature. Whilst regional cleavages with respect to the distribution of foreign direct investment (FDI) are acknowledged, empirical research on the spatial determinants of FDI in China has been limited. Furthermore, research on the spatial determinants of home country FDI in China has thus far been neglected due to difficulties in accessing the appropriate data. The objective of this paper is to examine the spatial determinants of Japanese direct investment in China by using an econometric model. To that purpose, a dataset is created from the Toyo Keizai directory on the overseas activities of Japanese companies. The results show that tertiary education, inland waterways, as well as coastal location are positive and significant determinants of Japanese investment in China.

Japanese direct investment in China

This paper uses survey data to study the characteristics of Japanese direct investment in China as compared to those in the newly industrializing economies (NIEs) and in the member countries of ASEAN. Japanese firms invest in China for cost reasons as well as to expand their market shares. This paper also examines the determinants of Japanese direct investment in China using a regional data set from 1990 to 2000. To form a basis of comparison we run similar regressions for the largest foreign direct investor in China: Hong Kong. Local demands affect significantly the inflow of investment from both sources. Wage costs exert a larger influence on Hong Kong investment than on Japanese investment, which can be explained by the difference in the characteristics of investment projects from Hong Kong and those from Japan. Japanese firms appear to be attracted to Economic and Technology Development Zones, whereas Hong Kong firms are more attracted to Special Economic Zones and Open Coastal Cities. The quality of infrastructure matters more for firms from Hong Kong than from Japan. Distance does not affect Japanese direct investment significantly. This may reflect Japan's extensive experience in managing its operations in the global marketplace.

Understanding Japanese Direct Investment in China (1985–1993):

Abstract Japanese private investors have recently established a remarkable presence in the Chinese economy. While the comparative performance of Japanese direct investment can be attributed to managerial, economic, social and political factors, the present article shows that elements of Japanese culture have also played a role. An intercultural comparative analytical framework is developed. Aggregate data and survey reports suggest that Japanese cultural factors have contributed to the performance of Japanese direct investment (1985–1993), relating to level, pattern and managerial behavior. This study points to 1) the importance of having a comprehensive understanding of Japanese direct investment including its cultural element, and 2) the necessity for the Western investors to pay close attention to the cultural aspect of a successful investment in China.