The Comparative Study Of Foreign Direct Investment Of China And Japan

Chinese economy has been developing fast after its "Reform and Open" policy30years ago. With the "Going Global" Strategy brought up by the Chinese governmentin2000, Foreign Direct Investment (FDI) was brought to a higher level of nationaldevelopment strategy. China obtained resources, expanded its market and upgraded itsnational industrial structure by FDI. Comparing China’s current status of FDI with thatof Japan in1950s to1980s, in terms of the choice of location, industry and subject ofinvestment, as well as policies, this article aims to identify the similarities anddifferences, thus to acquire inspirations for the development of FDI of China.Firstly, this article introduces theories about the choice of location, industry andsubject of investment, including The Eclectic Paradigm of International Production byJohn H. Dunning, Theory of Comparative Advantage by Kiyoshi Kojima andThe Technological Innovation and Industry Development in Developing Countries byJohn A. Cantwell and Paz Estrella Tolentino, which are of significance to both Chinaand Japan. Comparing FDI of these two countries in terms of the choice of location,industry and subject of investment, this article draws the following conclusion: the FDIof the two countries have different levels of diversity in the choice of location. Japan ismore diversified while China is concentrating on certain regions, like Asia and LatinAmerica, and rarely on developed countries i.e. Europe and North America. China andJapan are also different in the adjustment of industrial structure. FDI of Japanstimulated the upgrading of national industrial structure effectively, while China isn’tbenefiting from FDI to transfer the excessive production capability and the industrieswith comparative disadvantage to other locations. The subjective of investment is alsodifferent. Big multinationals are leading in FDI while SMBs also account a certainpercentage in Japan, comparing to China where large state-owned corporations playedthe major role and SMBs are relatively insignificant.Secondly comes to the comparison of FDI-related policies of China and Japan.Chinese policies are becoming more and more favorable to FDI in general. However,the strategic objective isn’t clear enough, nor is the formulation of the “Going Global” strategy. The complicated and inefficient approval process shows that support from theChinese government to FDI of SMBs isn’t sufficient.Finally, suggestions based on the comparison are made. China should enlarge itsFDI in developed countries, i.e. Europe and the US, and at the same time fully utilizeFDI to upgrade its industrial structure; diversify the subjective of investment, offeringsupport to SMBs in particular; set clear strategic objective, and enhance it withsimplified approval process and favorable policies.