The impacts of Japanese direct investment in China on the Sino‐Japanese bilateral trade
| Pages | 185-199 |
| Date | 03 October 2008 |
| Published date | 03 October 2008 |
| DOI | https://doi.org/10.1108/17544400810912356 |
| Author | Jinping Yu,Wenjun Zhao |
| Subject Matter | Economics |
Japanese direct
investment
in China
185
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 1 No. 3, 2008
pp. 185-199
#Emerald Group Publishing Limited
1754-4408
DOI 10.1108/17544400810912356
The impacts of Japanese direct
investment in China on the
Sino-Japanese bilateral trade
Jinping Yu and Wenjun Zhao
School of Economics, Nanjing University, Nanjing, People’s Republic of China
Abstract
Purpose – The 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/approach – An 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.
Findings – This 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 Jap an. This
suggests that that the relations between Japanese direct investment in China and the bilateral trade
are complementary.
Research limitations/implications – The 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/value – This 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.
Keywords Trade, China, Japan, Exchange rates, International investments
Paper type Research paper
1. Introduction
The economic linkages between China and Japan have been strengthened through both
trade and Japanese direct investment in China for past decades. Over the period 1978-
2006, the value of Sino-Japanese bilateral trade has risen sharply. According to United
Nations’ statistics, the trade value between China and Japan reached a new record
US$207.4 billion in 2006, which was about 40 times of that in 1978. Of this amount,
China’s exports to Japan amounted US$115.7 billion, and China’s imports from Japan
amounted US$91.7 billion. Over the same period, Japanese direct investment in
China has also experienced obvious changes. In 1978, there was almost no Japanese
direct investment in China, but in 2006, Japanese direct investment in China reached
US$6.2 billion. China is the largest host country of Japanese outward direct investment
in Asia.
The enlargement of the bilateral trade has generated great benefits to both
countries. On the other hand, it has also made the bilateral trade frictions be a sensitive
topic. The dramatic and sustained economic emergence of China has altered the
landscape of the pattern of the bilateral trade. In Jap an, ‘‘the threat or opportunity’’
question has been posed again and again in facing of the rapid growth of China. Over
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The authors thank an anonymous referee for helpful comments. All remaining errors or
omissions are the responsibility of the authors.
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