Japanese Multinationals in China and International Production Linkages: Structural Changes and Co-ordination in the Industrial Interdependence

This paper analyses the changing patterns of Japanese foreign direct investment (FDI) and the activities of Japanese multinational firms in different industrial sectors in China before and after the East Asian crisis in 1997 and 1998, and investigates changes in their impact on interdependence between China and Japan in the process of economic integration in East Asia. In order to analyse structural changes in international production linkages between the Chinese economy, Japanese multinational firms and the Japanese economy, we perform an input-output analysis on the basis of the recompilation of the Asian International Input-output Tables for 1995 and 2000, taking into account the activities of Japanese multinational firms in China. In particular, we examine the production-inducing effects of Japanese multinational firms and their contributions to value added in the Chinese economy in 1995 and 2000. Furthermore, the institutional implication of structural changes in international production linkages promoted by the activities of Japanese multinational firms in China is investigated from the viewpoint of the evolution of industrial specificities of the production and transaction processes of Japanese multi-national firms in different manufacturing industries.