Foreign Direct Investment

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A Comparative Analysis of the Effects of Foreign Direct Investment on China's and Japan's Economic Development since 1996

Table of Contents


Background of the Study2

Aims and Objectives3

Research Question4


Exchange Rate and Economic Development6


Trade Flows and Trade Discrimination7

Market Variables7

Foreign Direct Investments and Economic Development in Japan and China8

Economic Overview of China12

Market Analysis of Chinese Car Manufacturing Industry12

Market Analysis of Chinese Smartphone Industry14

Industrial and Economic Development in Japan15

Economic Performance of Japan16

Market Analysis of Japanese Car Manufacturing Industry16

Exploitation of New Markets17

Searching of Productive Efficiency19

Factor Differences for Economic Development19

Search of Strategic Assets20

Mergers, Acquisitions and Competition Pressure22


Data Sources and Research Limitations23

Data Type23



Background of the Study

This paper assesses the situation of foreign direct investment in relation to economic development of China and Japan since 1996. In order to better comprehend the current political and economic situation that sustains at China and Japan, the study attempt a presentation of the economic development of China and Japan since 1996. Then, the study presents the consequences of credit crisis to the course of foreign direct investment in China and Japan. We consider foreign direct investment in relation to the accession negotiations of China and Japan with international other foreign countries. Thus, the study focuses on the field of study of international political economy in order to understand the complexity between the political and the economic situation of China and Japan which has making its impact on the foreign direct investment.

Aims and Objectives

This paper investigates the foreign direct investment flows in context of political and economic situation of China's and Japan' economic development since 1996; and also on its impacts and various other determinants which govern the levels and performances of foreign direct investment in China and Japan. The paper discusses FDI in the China and Japan with respect to overall trends including stages, sources and their regional, sectoral and sub-sectoral distributions particularly political economy perspective. Positive trends are observable in both contracted and actual FDI stocks with common jumps occurring in the early eighties because of the infusion of massive FDI into the petrochemicals sub-sector of the China and Japan. Foreign direct investment in these countries is seen to be predominantly of the joint venture form while Greenfield investments expected to accelerate after the imposition of a New Investment Law permitting these types of investments. Sectorally, the manufacturing sector attracts the largest share of FDI flowing into the Japan and China. This is attributable to the fact that most of foreign direct investment tended to flow to the heavy Petrochemical industry comprising the majority's share of total foreign investments in the Japan and China. Moreover, the paper then discusses the determinants of both contracted and actual foreign direct investment that are getting affected by the political economy of China and Japan.

Research Question

The research questions formulated for the working on the economic growth of China and Japan, in context of foreign direct investment and political economy, it include the following:

What role foreign direct investment plays in ...
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