Japanese Foreign Direct Investment in China: From Export-oriented Production to Domestic Marketing

This lecture gives a brief outline of direct Japanese foreign investment in China between 1978 and 2002. When the Chinese government implemented its policy to induce direct foreign investment in the 1980s, it first set a target for economic development, and then sent Chinese delegations around the world seeking to purchase plants and equipment to modernize the Chinese factories. There was active participation by Japanese, American and European multinational enterprises, negotiation started and quotations were given. The winning company received an order and then started factory production. However, the Chinese government then adopted a retrenchment policy because of a financial deficit and shortage of foreign currency. China then faced a difficulty because they had to reduce the importation of parts and therefore scale-down production of factories.

In the 1990s economic development was led by local governments in China. Japanese foreign direct investment actively responded to the initiative given by the local governments, which provided various incentives such as tax holidays and the establishment of industrial parks. The peak was reached in 1995 when Japanese Yen was competitively priced. Japanese multinationals acted as parts suppliers in electrical and electronics industries, which mainly exported for American and European mobile phone makers.


Horaguchi Haruo is Professor at the Faculty of Business Administration, Hōsei University and visiting lecturer at the Graduate School of Tsukuba University, Business Policy Department. He held a Fulbright Scholarship at Harvard University and was visiting Professor at Lyon in France. His major research fields are Japanese Foreign Direct Investment, Globalism and Global Finance and related fields. He publishes widely in English and Japanese.