Comparison Of The Outward Direct Investment Between Japan And China With The Currency Appreciation

In recent years, China's outward direct investment increased. At present, both stock and flow of China's outward direct investment are rapidly increasing. More and more scholars are concerned about China's outward direct investment and conducted a study. Study found that the current situation of China in outward direct investment is similar to Japan in the 80s of the 20th century. By comparing the two countries to find the factors affecting the outward direct investment in each country, especially exchange rate fluctuations on the two cases outward direct investment and the degree of impact in the appreciation of the currency circumstances, Finally, access to the Japanese experience for the development of China's outward direct investment.This paper selects China and Japan during a similar economic background and finds two factors that affect the outward direct investment in China and Japan, the "push factors" and "pull factors ". And then, we analyzed using different methods. On the "push factors" analysis we use least squares multiple regression to find the factors that influents outward direct investment in the two countries. Nest is the unit root test and co-integration to find the long-term relationship between the factors. On the "pull factors" analysis we chose panel analysis to find the factors of the host country which attract outward direct investment in the two countries, respectively.The result shows that outward direct investment of the two countries is different. Outward direct investment is more sensitive to exchange rate fluctuations in Japan. But for China, the result is the opposite. For Japan, it faces the decline in exports and the trade friction in the case of currency appreciation. Outward direct investment increased to ease the trade friction. But China's outward direct investment declined as the appreciation of the RMB. For Japan, the appreciation will lead to more of outward direct investment to alleviate pressure of international trade and reduce trade friction. But for China, outward direct investment is not sensitive to exchange rate fluctuations. Currency appreciation will bring even the reduction of outward direct investment. The future, with the exchange rate reform there will be more flexible of RMB exchange rate and the impact of it for outward direct investment in China will be more obviously.This article is divided into five parts:the first part is the introduction. In this article, we briefly describe the background, research methods and innovation. The second part is the literature review of the impact factors on outward direct investment. The third part analyzes the development process of outward direct investment in Japan and China and compares the different characteristics between them. The fourth part is the empirical test and the last is the conclusion and enlightenment.