Jurnal Internasional Ekonomi
Proquest Entrepreneurship : The impacts of Japanese direct investment in China on the Sino-Japanese Bilateral trade
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. 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. 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 Japan. This suggests that that the relations between Japanese direct
investment in China and the bilateral trade are complementary. 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. 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.
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