Study On The Impact Of Japanese Direct Investment In China On The Scale And Structure Of Bilateral Trade

The relationship between foreign direct investment and international trade has always been of great concern,and China is one of the major investee countries.China and Japan are the most influential economies in Northeast Asia,and the direct investment situation and trade situation between the two countries are of great concern.2019 saw the global outbreak of the new crown epidemic pneumonia,which led to the global economic depression,and the trade between China and Japan still has a good trend,which shows that the investment and trade between the two countries have a broad space.From the current research literature,most of them analyze the industrial distribution and changes of investment trends of Japanese direct investment in China,but the years are earlier and the time span is shorter.This paper focuses on a comprehensive analysis from the beginning of Japanese direct investment in China,from two perspectives of Japanese direct investment in China on trade scale and trade structure of the two countries,and through two empirical evidences on the impact of Japanese direct investment in China on trade scale and trade structure,we can conclude how to use foreign investment to increase the trade scale and improve the trade structure of China.This paper firstly explains the background and significance of the selected topic,and then elaborates on the relevant theories of investment and trade scale and trade structure,including Mondale’s substitution effect,Kojima’s complementary effect,product cycle theory and comparative cost theory,so as to prepare the theoretical foundation for the next research analysis.In this paper,the history of Japan’s direct investment and trade with China are studied separately,and are divided and analyzed according to time stages from both scale and structure perspectives.After analysis,it is concluded that the scale of Japanese direct investment in China and the scale of bilateral trade both show a general trend of fluctuation and increase,and Japanese investment in China is more concentrated in the secondary industry,and the trade structure between the two countries also has a certain degree of imbalance.Finally,the time series data from 1997-2019 are selected and empirically analyzed by Eviews software from both aggregate and structural aspects respectively,and the relevant conclusions are obtained through long-and short-term Granger non-causality tests.The main conclusions from the model analysis are:(1)Japanese direct investment in China has a significant complementary effect on the total trade between the two countries in both the long and short term.(2)The upgrading of China’s industrial structure and trade structure will promote the increase of Japanese FDI in China,and although it will show substitution effect in the short run,it will show obvious complementary effect in the long run.Finally,four suggestions are given based on the full analysis to better utilize foreign investment to promote the increase of trade scale and the improvement of trade structure.