Structural Change in and the Competition into Japan-China Trade

|China

The Value of Japan-China Trade Reaches Record Levels

The value of Japan’s trade with the rest of the world (total value of imports and exports) reached a record high in 2000 of $861.8 billion ($480.7 billion of exports and $381.1 billion of imports). However, from the latter half of 2000, there was a slowdown in the growth of both imports and exports, and in the first period of 2001, exports have slumped to minus 10.9%, while imports dropped to plus 0.7% in comparison with the previous year.

In contrast to this trend, trade transactions between Japan and China have been on the rise. In the first period of 2001 (January to June), the total value of trade rose 12.7% on the previous year to $43.65 billion ($15.53 billion of exports and $28.11 billion of imports), reaching an unprecedented high. If this trend continues, the outlook is for the total for the whole of 2001 (January to December) to break through the $90 billion mark, surpassing the figure of $85.7 billion for 2000.

The Reasons for Structural Change in Trade

To provide some background for this thriving trade situation, China moved from fourth place in the rankings of Japan’s export partners in 2000 to become second only to the top-ranking USA, overtaking Taiwan and the Republic of Korea. The factors in this growth in exports to China include i) the growth in demand for IT-related products in China. In particular, exports of electronic parts, mainly semiconductors, have risen; ii) an export drive, which has been effective due to the weak yen; iii) China’s cutting of customs tariffs.

On the other hand, providing a background to the rise in imports, we have such factors as: i) the acceleration of moves to procure low cost, high quality products via consignment production for major mass retailers such as “UNIQLO”, in response to a rise in the quality of Chinese products and the cost consciousness of consumers; ii) a shift by companies towards China as a procurement location as a result of an improvement in the quality of household electrical appliances, peripheral computer equipment, etc.

In particular, there was a major change in the composition of imports, viz. machinery overtaking textile products, which previously accounted for the largest share of imports from China. Imports of textile products continued to rise, up 7.9% on the same period of the previous year, but the rise in imports of machinery, such as household electrical appliances and peripheral computer equipment has outstripped this. In terms of imports to Japan, machinery accounted for 29.3%, putting it head and shoulders above the share of textile products, at 26.9%. The structural change in trade between China and Japan can be inferred from this.

The Deepening of Japan-China Relations Via the Introduction of Competition

In step with the expansion in trade between Japan and China, Japan’s trade deficit with China expanded to $12.57 billion in the first period of 2001, and the deficit with China continued to be the largest of all Japan’s trade deficits. In response to China’s export offensive, Japan has been looking into safeguards and antidumping measures. At the same time, as a result of China’s entry into the WTO, the “competition principle” will be introduced to the country and it is trying to undertake structural reform of the economy.

If Japan is aiming for structural reform of the economy in its true sense, it ought to actively open up the market and introduce “competition” domestically, rather than introducing measures to limit imports from China. This is because it is the Japanese companies that have moved into China and the development of imports that Japanese companies have undertaken that are instrumental with regard to trade with Japan, and the rise in imports and exports can be understood as being the result of international division undertaken by Japan and China. If Japan deepens its mutually dependent relationship with China through the international division of labor and an expansion in trade, this may contribute not only to the stability of Japan but also to that of the whole of East Asia.

[Translated by ERINA]