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GTAP Resource #4182

"The role of Japanese multinationals affiliates in China: A dynamic CGE analysis of FDI between Japan and China "
by Latorre, Maria and Nobuhiro Hosoe


Abstract
RATIONALE AND OBJECTIVE

In the World Investment Prospect Survey by UNCTAD, China has always appeared as the world’s most attractive destination of foreign direct investment (FDI) in 2008-2012. In turn, Japan has recently recovered its position as the world wide second largest investor after the US. With the appreciation of the Japanese yen and weak growth at home, Japanese multinationals (MNEs) have been very actively looking for opportunities to invest abroad. The government has, further, offered incentives for the acquisition of foreign assets. Thus, Japanese outward FDI going to China more than doubled in 2011, while across its different destinies it doubled for that year. Prospects suggest this strong increase will continue in the future (UNCTAD, 2012). Due to the high volatility of investment, the latter expansion contrasts with the initial collapse of Japanese’s FDI in China at the beginning of the crisis.

This paper analyses the impact of the evolution of Japanese MNEs in China experienced between 2007 and 2010, as well as, several future scenarios. The first question is how the pattern of FDI from Japan to China has transformed these domestic economies in terms of, especially, industrial composition and competition between local firms and MNEs. The second question is how much the evolution of FDI changed the comparative advantages of their industries and the resulting trade patterns between them. The connection between FTAs and the surge of FDI inflows among the nations is also an issue of interest as has been observed in Europe and other areas (e.g., Baldwin et al. (1996), Bajo-Rubio and López-Pueyo, (2002), and Momodou (2011)). Our study could shed light, beyond the existing trade-focused models, on the prospective FTA between Japan and China. As South Korea is being involved in the negotiations, our study could also carry an implication on their tri-party FTA in East Asia, where FDI drives their rapid integration.


MODELLING APPROACH AND ...


Resource Details (Export Citation) GTAP Keywords
Category: 2013 Conference Paper
Status: Published
By/In: Presented at the 16th Annual Conference on Global Economic Analysis, Shanghai, China
Date: 2013
Version: Preliminary version
Created: Latorre, M. (4/15/2013)
Updated: Latorre, M. (4/15/2013)
Visits: 1,614
- Dynamic modeling
- Foreign direct investment
- Asia (East)


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