Factors That Affect Changes Of Japan FDI CAFTA

Under the background of regional economic integration, CAFTA bring a lot of benefits to the member states. However, it brings challenge to member states at the same time. China is a hot destination of foreign direct investment after economic reform. However, because of the economic transition, industrial structure readjustment and the economic new normal, some investors take a wait-and-see approach to new situation and add their investment to the region around China. Especially Japan, one of the biggest investment home country for China, also transfers its direct investment to ASEAN. There are many researches about Japan FDI. However, the research on Japan FDI in CAFTA is rare. So, from the perspective of Japan FDI in CAFTA, this paper tries to combine the foreign direct investment theories with empirical researches and analyzes the characteristics, trend, total amount and structure of Japan FDI in CAFTA. The data shows that Japan FDI in CAFTA is trade-oriented, market-oriented and concentrating on manufacturing. Then I build an expand gravity model and use Stata to analyze panel data. The empirical analysis shows that economic development, openness, exchange rate and inflation rate are significant influence factors for Japan FDI in CAFTA. The conclusion is that China and ASEAN countries have their own advantage and disadvantage, however, China is losing its advantages. China should improve its economic power between the cooperation and competition of CAFTA and remain attractive to foreign investment.