A Study On The Relation Between Japan's Direct Investment In China And Sino-Japanese Trade

Along with the quick growth of FDI and international trade of China, it seems to be particularly important for China to analyze the relation between FDI and international trade. Japan is one of the main sources of FDI and the trading partners of China. It is beneficial for making Chinese economic policy concerning Japan to study the relation between Japan's direct investment in China and Sino-Japanese trade. At present, in China there are few systematic researches on the relation between FDI and international trade, especially between Japan's direct investment and Sino-Japanese trade. Based on the latest theory, the author has a preliminary discussion about the relation.With the Granger Causality Test, the author analyses the relation between Japan's direct investment in China and Sino-Japanese trade. The first part of the paper is the theory about the relation between the two, and brief theoretical retrospect of each of them. The second part is the analysis of historical and current situation about Japan's direct investment in China and Sino-Japanese trade. With the Granger Causality Test, the third part analyses the relation between the two. The result shows that there is a long-term complementary relation between the two, and there is two-way causality relation between FDI and Chinese export, but the relation is one-way causality between FDI and Chinese export. At the same time, the effect of substituting in a short term is found in FDI and Chinese import. Based on the above achievements, the author proposes relevant policies about promoting Japan's direct investment and Sino-Japanese trade.