Factors That Can Affect The Absorption Of Foreign Direct Investment Policy Between China And Japan

This article explores china’s foreign direct investment (FDI) policy as a host country after Reform and Open and its effect came with FDI policy by comparison to the different policy employed by and its influence imposed on Japan between1945and1973. Then the reason why the two countries took on distinct policies will be investigated, using three-level framework---Transnational Corporations (TNCs), developmental strategy of host country and international environment. First of all, manufacturing industry, categorized into market-searching type, is TNCs’main investment area, which posed great threat to Japan who was ambitious with building a strong manufacturing base. While in China’s case, the emergence of TNCs’global network and its vertical producing structure in particular had offered a great chance to a labor-rich China in engaging in global market. Second, from a strategic point of view, the contrasting developmental strategy, import-substituted strategy and export-oriented strategy launched by Japan and China respectively had also contributed to its disparity in soliciting FDI. Third, as far as international environment is concerned, mainstream economic theory and American strategic goals also lead to two countries’different choices on FDI policy.