Theorizing Japanese FDI to China (original) (raw)

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).

Japanese Direct Investment in China and Other Asian Countries

2002

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.

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.

Is China learning from its neighbors? A comparison of overseas investment between China and other east Asian economies

Chinese Geographical Science, 2000

Twenty years' economic reform and open door practice have made China not only an important host nation to foreign direct investment (FDI), but also the largest FDI home nation among the developing countries. In fact, since the late 1980s, the Chinese government has not simply put its effort into exporting "made-in-China" products to earn foreign currency or into encouraging foreign inward capital, but also actively encouraged its manufacturers to invest overseas. This paper examines China' s outward FDI and poses the question to what degree China is expected to follow the other East Asian economies or will it forge its own particular patterns. The first section of this paper reviews the characteristics of FDI of China's neighbors and then it turns to examine the spatial patterns of and motivations for China's FDL Finally, this paper looks at potential of China' s outward investment in the near future. It concludes that China is not Japan but its potential for further outward FDI is huge. With its WTO membership and growing economy, China will become the second to Japan or USA. It will also use its financial power to further contain Taiwan's independence.

Is “China Fear” Warranted? Perspectives from Japan's Trade and Investment Relationships with China*

Asian Economic Papers, 2003

A fear of China's economic growth, particularly with regard to its recent evolution into the "factory of the world, " is often expressed in the Japanese mass media. This paper reviews the development of trade and investment relations between Japan and China and examines the validity of this "China fear, " pointing out the ways in which China continues to lag behind Japan on many economic fronts and describing strategies that Japan could use to improve its performance. Japanese firms need to focus on producing more specialized high-tech products. At the same time, to cope with competition from China, they must take more drastic measures to keep costs down in the production of low-tech products. Some Japanese enterprises have already initiated new approaches in management, production, and distribution. The views of three of Japan's leading economists are critically reviewed, with a focus on how Japanese firms might draw profitable lessons from China's situation, improve their joint ventures with Chinese firms, and benefit from China's large market by concentrating more on local conditions.

Japanese direct foreign investment and the Asian financial crisis

Geoforum, 2001

This paper examines the extent to which the Asian currency crisis of 1997±1998 impacted upon the behaviour of Japanese foreign direct investment (FDI) in the manufacturing sector. Much literature has claimed that transnational corporations (TNCs) are unlikely to be ®rmly embedded in the host countries where they operate. If this is the case, then Japanese ®rms in Asia might have exhibited a high degree of disinvestment or plant closure and transfer of operations to other countries following the onset of the ®nancial crisis. Although the events surrounding the Asian crisis and subsequent recovery are still unfolding, FDI data, surveys of Japanese ®rms, and initial reactions by Toyota Motor Corporation and Matsushita Electric Industrial were reviewed to examine this proposition. In general, the evidence suggests that Japanese TNCs have not¯ed Asia bur rather they responded in the following manner. First,¯ows of Japanese FDI into Asia overall held steady throughout ®scal year 1997±1998, although it was set to decline thereafter, at least for the short term. Second, at the level of individual corporations, there is some evidence to show that major ®rms have maintained their operations, and that they have shifted to an export-orientation so as to earn income from their Asian production in overseas currencies. Third, the survey evidence points to a long-term commitment to Asia by Japanese transnationals. Ó

Theorizing Japanese FDI to China (original) (raw)

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