Japanese Direct Investment in China and Other Asian Countries (original) (raw)
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Japanese direct investment in China
China Economic Review, 2003
This paper examines the recent trends, characteristics and determinants of Japanese direct investment in China. To study these issues, we first use qualitative and survey data to compare Japanese direct investment in China with similar investment in other Asian countries. We found that within Asia, China is the largest recipient of Japanese direct investment, with Hong Kong and Thailand coming in second and third. 76.5% of Japanese direct investment in China is in manufacturing. Such concentration in manufacturing is typical for Japanese investment in developing Asia, but rather unusual compared with Japanese investment in other developed countries. Almost one-third of Japanese investment in China is in electrical machinery. 40% of Japanese firms invest in China for cost reasons, while 21% say that they invest in China to expand market shares in China. In 1999, Japanese affiliates in China procure 47% of their inputs from China and sold 47% of the goods locally in China. We also examine econometrically the determinant of Japanese direct investment in various regions of China and compare these locational factors for direct investment from Hong Kong, the largest foreign investor in China. We found that Hong Kong companies place a stronger emphasis on labor costs and a smaller emphasis on labor quality compared to Japanese multinationals. In addition, Japanese firms prefer Economic and Technology Development Zones (ETDZs) while Hong Kong firms are attracted to Special Economic Zones (SEZs).
Determinants of U.S. and Japanese Direct Investment in China
Journal of Comparative Economics, 2002
This paper examines the determinants of FDI from U.S. and Japan in China using the provincial data set from 1991 to 1997. The results of the regression analyses are further compared to those of the aggregated FDI without U.S. and Japan as a benchmark case. The study found various similarities and differences in the importance and the magnitudes of the determinants of FDI among three FDI sources. It is shown that both level of GDP and the lagged GDP significantly affects inflow of FDI from all sources. The hypothesis that the good quality of infrastructure is conductive to attract FDI is strongly supported for all FDI sources, although the magnitude of the impact of the variable varies. The policy variables are also found to have significant positive effects on FDI. The labor quality exerts larger influence on Japanese FDI than on U.S. FDI, which may reflect the different structure for coordinating activities between U.S. and Japanese firms. The results for the wage variables are inconclusive. The study also shows the marginal support for the positive effect of cultural proximity between Japanese FDI and the provinces of Manchuria.
The Extent and History of Foreign Direct Investment in Japan
SSRN Electronic Journal, 2000
The past few decades have seen a significant rise in foreign direct investment (FDI) worldwide. While Japanese companies have actively contributed to this trend, FDI in Japan continues to be much lower than in other countries. This paper explores the history of both outward and inward FDI in Japan, looking in particular at the reasons for the low levels of inward FDI. New calculations for this paper -based on data from the Establishment and Enterprise Census -show that foreign firms' role in the Japanese economy may be substantially larger than the most frequently cited published statistics suggest. In some industries (motor vehicles and electrical machinery in particular), inward FDI penetration, as measured by the share of employment accounted for by foreign affiliates, in Japan in fact is on par with the United States. However, a large number of "sanctuaries" with almost no foreign involvement remain, so that FDI penetration overall is still very low. While to some extent, this can be explained by Japan's relatively isolated geographic location, historical factors play an important role. Throughout the centuries and until quite recently, Japan's rulers have viewed foreign involvement in the economy as a threat and consequently erected various barriers to FDI, which are discussed in detail.
Theorizing Japanese FDI to China
Journal of Comparative International Management, 2006
Using mainly archival data, this paper examines the nature and causes of Japanese foreign direct investment (FDI) to China and theorizes it with inductive arguments. It proceeds as follows. After a brief introduction on China's robustness in the global investment market, it introduces the position of Japan as investor in this country, and proceeds with an examination of the major theories of FDI. It then examines the underlying causes of Japanese FDI to China in view of those theories. The paper concludes that, in addition to many investment-alluring incentives, most prominently China over time has infused, fostered, created, and nurtured numerous competitive advantages (pull-factors) within its investment proliferating environment, which ultimately ushered FDI from Japan to it. Domestic factors as well as global investment competitors drive (push-factors) toward China further induced Japanese multinational corporations (MNCs) to boost investment into China.
Strategic Management Journal, 1994
A firm's decision to manufacture abroad depends on location, governance, and strategic factors. Although it is obvious that firm-specific (as well as industry) characteristics lead to foreign direct investment (FDI) and that internalization and strategic interaction theories are complementary, only a handful of empirical studies have considered both sets of variables simultaneously, and have done so at the firm-level.
U.S. and Japanese Foreign Direct Investment in East Asia: A Comparative Analysis
Policy Studies Journal, 2008
East Asia has led the world in economic growth and export expansion in recent decades. The phenomenal rate of economic growth among the so-called "four little tigers"-Hong Kong, Singapore, South Korea, and Taiwan-enabled them to achieve newly industrializing country (NIC) status in the 1980s, followed by Indonesia, Malaysia, and Thailand. Earlier studies explained the development from the government-led development paradigm, or the so-called the statist approach. Scholars also argue that foreign direct investment (FDI) played an important role in the economic development, thanks to technology transfers. Kojima and Ozawa and later Kohama, however, argue that Japanese FDI help East Asian economies while U.S. FDI do not because Japanese technology transfer practices are appropriate for East Asian countries but not the United States'. Thus, we revisit the issue of East Asian economic development and test the economic effects of FDI from the United States and Japan. Using a Barro-type growth model, we test the effects of FDI from the United States and Japan on economic growth in East Asian NICs. We find that FDI from both the United States and Japan helped economic growth in the "four little tigers," but not in Indonesia, Malaysia, and Thailand.
DETERMINANTS OF JAPANESE DIRECT INVESTMENT IN SELECTED BIMP-EAGA COUNTRIES
This paper uses panel data analysis to identify how Japanese multinational corporations (MNCs) allocate their investments in the selected BIMP-EAGA countries (i.e. Malaysia, Indonesia and the Philippines). The paper hypothesizes that the following six elements would influence the inflow of Japanese Direct Investments (JDI) into the area: country's market size, growth rate of market size, per capita income, trade deficit, inflation rates and political condition. The main findings from the panel data analysis are that there is a significant relationship between Japanese direct investments and political condition in the recipient countries. The inflows of Japanese investment tend to decrease as the political risk increases. It means that Japanese MNCs tend to allocate more investments into the countries with better political condition.
Asian Economic Journal, 2000
We analyse the effects of both ownership and location advantages on the size of foreign direct investment, by combining industrial organization and location theory approaches. The estimated results employing a truncated distribution model show that the parent company's managerial resources and the external economies in a located region between them determine the FDI size of Japanese electrical machinery and appliances firms. This result suggests that empirical studies, applying only the industrial organization theory approach, need to be complemented by the location theory approach. * We wish to thank for Professor Akira Kohsaka of his invaluable and helpful comments and referees for their useful comments. I also wish to thank professor Kanemi Ban for his helpful comments on a first draft and Shingo Takagi for discussions. I take full responsibility for all errors and omissions. Nippon Life Insurance Foundation provided financial support.
Foreign Direct Investment in East Asia
This paper surveys research on foreign direct investment (FDI) in East Asia. The pattern of FDI in the region has changed over time. Outward FDI from Asia began in earnest when Japanese multinational corporations (MNCs) shifted production to other Asian economies following the 60% appreciation of the yen that started in 1985. The major destinations for Japanese FDI initially were South Korea and Taiwan. However, as labor cost in these economies rose, Japanese FDI shifted to Association of Southeast Asian Nations (ASEAN) economies. MNCs from South Korea and Taiwan responded to the increase in labor costs by also investing in other Asian economies. Following the 1997-98 Asian financial crisis, China became a favored destination for FDI. As noted, one of the striking features of East Asian FDI is its complementary relationship with trade. The complementary nature of trade and FDI in Asia is partly due to the rise of regional production networks. Parts and components rather than final products are traded between fragmented production blocks. To understand the slicing up of the value chain, it is helpful to compare the production cost saving arising from fragmentation with the service cost of linking geographically separated production modules . This has been called "networked FDI" by . It is a complex form of FDI in which horizontal, vertical, and export platform FDI take place to differing degrees at the same time. The fragmentation strategy adopted especially by Japanese MNCs is to allocate production blocks across countries based on differences in factor endowments and other locational advantages. The paradigm example of this type of production fragmentation is the electronics sector, where parts and components are small and light and can easily be shipped from country to country for processing and assembly. In this sector, the quality of a country's infrastructure plays an important role in its ability to attract FDI.