Effects of Globalization on the Chinese and Japanese Economic Growth
Info: 6973 words (28 pages) Dissertation
Published: 30th Dec 2021
Tagged: EconomicsInternational Studies
Chinese and Japanese economies have experienced dramatic expansion and rapid economic growth. These countries have two of the leading growing economies in the world. Globalization has facilitated the growth of these economies. The relationship between Japan and China cannot go unnoticed in the context of globalization, as it has proven to be an essential element of economic growth. Specifically, globalization affects the economic growth of a country positively by promoting the accumulation of capital (acquisition of assets to increase wealth and value), upgrading of the industrial structure, exchange of goods and services, advancement of technology, and institutional advancement (overall expansion and growth of a firm). In general, globalization facilitates foreign direct investment, technological innovation, and the achievement of economies of scale. It also generates considerable net benefits to individual economies throughout the globe by making international markets accessible and efficient. It also intensifies competition, which improves the quality and affordability of goods and services exchanged in the market. The benefits discussed in this research paper include those that accrue from foreign trade in the form of net value generated from imports and exports and foreign capital investments.
An Overview of Globalization
Globalization revolves around the integration and interconnection of markets and the execution of international trade transactions. In other words, globalization involves international economic transactions involving the global exchange of goods and services, transfer of technology from one country to another, and flow of capital between countries. Combining the exchange of products and services and flow of capital economic transactions facilitates exemplification of another form of transaction revolving around the manufacturing of goods and services (Das 2).
Specifically, the flow of goods and services from one country to another refers to the import and export of commodities and services. Examples of services include insurance, banking, teaching, and telecommunication services amongst others. On the other hand, goods may consist of merchandise, food products, and natural resources such as oil, coal, and natural gas amongst others. For instance, the flow of capital from one country to another entails the development or acquisition of plants (production facilities) or by investing capital in the form of deposits and share markets across the border. Another form of an international flow of goods and services centers on foreign direct investment involving globalized manufacturing of goods that entails setting up of a production facility in a country through capital investment emanating from another nation and the utilization of resources from other countries in the production process or targeting consumers of different countries across the world. Das (2) substantiates that these economic transactions that cut across the borders should not be recognized as watertight since in most of the cases the activities are a combination of these elements.
Most importantly, the United Nation identifies necessary implications of globalization. The critical effect of globalization includes internationalization of trade, finance, and investments. Globalization has facilitated the growth of international trade and foreign direct investment involving reduction and removal of trade barriers and establishment of national economies to trade, information, and capital flow. Another implication surrounds rapid improvement of technology. Globalization has promoted the transfer of technology from one country to another. Additionally, globalization of economies has empowered cheap, instant communication and massive dissemination of information that affects the styles of culture, social and political organizations.
This paper examines the effect of globalization on the Chinese and Japanese economic growth. Some of the benefits include foreign direct investment, economies of scale, exchange of goods and services, and technological innovation and transfers amongst others. However, the paper will look into the history of globalization in China and Japan to explore how globalization found its way into the two countries, establish the economic relationship between the two countries, and then analyze the impact of globalization under foreign trade perspective on the economic growth of China and Japan through their contributions to the world economy.
The History of Globalization in China and Japan
The outbreak of globalization occurred between 1820 and the commencement of the Second World War in 1914. During this time, globalization was facilitated by the reduced transport costs, the plummeted tariff barriers brought about as the United Kingdom, and other countries developed and upheld the trading systems. Notably, globalization receded over the First and the Second World War, including the interim between the two wars, with different barriers, rose to restrict immigration and the transfer of goods, services, and capital as the international community divided into the economic blocks.
The second phase of globalization was experienced during the postwar period reinforced with significant progress in the means of communication and transportation, and the development of the current multilateral trading system, and the systematic progression that opened channels for several designs of trade partnerships and collaborations. Particularly, the development of improved sea and air transport, and the establishment of railways and advanced communication networks stretching across the world in addition to the advances in information technology contributed to this second boom of globalization. The third phase of globalization took place during the postwar years, which ushered the contemporary era of globalization characterized by foreign direct investments and trade of goods and services in the international market.
Particularly, in China, Den Xiaoping, the mastermind behind China’s economic reforms in 1980, insisted that China need to double its national income drawing insights from the National Income Doubling Plan in Japan. Since then, China formulated and implemented several reform policies to transform its economic regime to develop a market-extensive economy through the combination of the planned economic system emanating from socialism and a market mechanism originating from capitalism (Marelli and Signorelli 132). In return, after making its announcement regarding the adoption of a socialist market economy in 1993, liberalization was manifested in the Chinese economy. Notably, the economy became progressively open to the world reinforced with the being a member of the World Trade Organization. In 2010, China was declared as one of the largest economies and the most massive export in the world and the largest outperforming Japan and Germany respectively (Xue, Luo and Li 2). Through these reforms, the Chinese economy became liberalized and globalized.
In this era of globalization, participating in economic activities such as trade and ventures beyond the national borders is essential for the survival and generation of proceeds for large and small firms. Notably, during the 1980s Japanese manufacturing firms especially organizations in the automotive and electronics industries participated in the world market where they reaped substantial revenues. Expansion of the export shares in the international trade volume spurred political issues from the United States and European nations, and initiation of several trade negotiations such as the General Agreement on Tariffs and Trade (Urata 20). During this time, globalization was promoted by trade liberalization, technological developments, and privatization of industries. Following the economic bubble burst that took place in the early 1990s, the economy in Japan was marked by slow economic growth deteriorating the significance of participating in the international market. Notably, optimizing the benefits of a global market require not only the exportation of goods and services but also the establishment of production overseas across the border.
In the 1980s, firms in Japan began increasing their activities in the overseas market through foreign direct investments. This period was suitable for the expansion of foreign direct investment since Japanese appreciated because of the Plaza Accord. Specifically, the Japanese firms established their production facilities and activities in other countries including Malaysia and Thailand. Numerous Japanese organizations expanded their production operations in China reinforced with the open door policies adopted by China (Motohashi 14). Specifically, the offshore production level in Japan stood at 8.6% in 1994, which represented an enormous expansion from approximately 3% in 1986 (Heizo and Ryokichi 8).
Globalization in Japan peaked in the 1980s because of the rapid rise of yen. The country increased its dependence on the outside world as its companies began to take advantage of the emerging opportunities in the global market. Japanese companies like Toyota and Nissan, for example, took advantage of globalization and began to export their products to emerging markets in Asia and Africa.
Chinese and Japanese Trade
This section examines the trade between Japan and China to analyze their approach to foreign trade. Yoon and Yeo (123) affirm that China and Japan are interdependent through foreign trade, portfolio, and foreign direct investments. According to Rusdy et al., the relationship between the two countries represents the essential bilateral ties in the world despite being compromised by political influence. Armstrong (2) agrees with Rusdy et al. by asserting that China and Japan share the third largest economic partnership all over the world. Starting from arm’s length trade relationship in 1978, the trade connections concerning foreign trade structures between the two countries developed into a collaborative relationship in 2007 making it the third largest in the world. This partnership has manifested itself through the remarkable expansion and growth of trade and foreign direct investment over the last three decades.
The two nations rely on each other through trade relations. For instance, the economic engagement with China helped Japan recover from economic breakdowns during the 1990s. However, the background of the relationship surrounds the heightened complementarity in the trade structure between Japanese and Chinese economies, and it has evolved. The relationship of China with Japan has been crucial in staying updated to recent industrial technology and in transitioning from small to large income country through leveraging the industrial technologies provided. Most importantly, this bilateral relationship has impacts on the rest of the region and the world due to the oriented production networks in which the two nations’ economies are featured in addition to the fact that they control a substantial share of the international market.
Trade Structures / Models
Trade (import and exports) between Japan and China has experienced rapid growth over the last few years. In 2015, Japan imported goods worth around $161 billion from China. Therefore, China is one of the Japanese’ top import partner constituting about twenty-seven percent of the imports originating from China. Mainly, the United States accounts for eleven percent of exports to Japan making China the top exporter of goods to Japan since 2011. On the other hand, the exports from Japan to China amounted to approximately $100 billion accounting for almost eighteen percent of the total exported by Japan. In 2015, Chinese volume of exports to Japan represented the second largest export partner of Japan. Notably, the Chinese nation imported goods worth nearly $100 billion from Japan. Japan is among the largest Chinese import partners accounting for roughly nine percent of all imported goods coming from the Japanese economy (Baldursson 6).
Foreign Direct Investment
The China-Japan economic relationship also shares foreign direct investment. According to statistics in China and Japan, Japanese capital is vital to China and vice versa. Mainly, during the investment boom in the mid-1990s and 2000s, Japanese companies made significant ventures in China. On the other hand, Chinese external investment has been spearheaded by the country’s economic development. However, much of the investment is concerned with resources. For instance, China’s investment is driven with the aim of extracting rather exploiting and importing natural resources such as natural gas and petroleum in Central Asia and Africa.
Notably, China’s investment in Japan has experienced considerable expansion for the last ten years. However, this investment is much less than that made by Japan in China. By analyzing the investment balance at the end of 2011, the investment of Japan to China amounted to approximately seven trillion yen. On the contrary, Chinese investment in Japan summed up to around forty-three billion yen. Thus, investment between the countries differs from trade since the relationship reflects a bidirectional connection (Nakagane 43). In other words, the economic relationship between Japan and China from a foreign direct investment point of view, the two countries shares a unidirectional relationship with Japan making investments while China receives.
Distance issues perhaps cause the unidirectional relationship, which is an essential determinant of trade. Distance, according to the gravity approach of trade, the value of trade expands with proximity when other conditions do not intervene. Particularly, investment, however, financial resources do not have weight: if resources exist, the market is available, production is needed, then necessity outperforms the distance. More so, the interaction between investment and trade is different in Japan and China. Structures are adopted when Japan invests in China, these companies’ ventures will establish some of the production operations in China. Furthermore, these corporations will export the immediate and final products produced in China to Japan. However, there exist many instances where investment in Japan occurs via mergers and acquisitions for the Chinese firms to acquire technology belonging to corporations from Japan.
In other words, the economic tie between China and Japan is one of the most important bilateral relationships around the globe. Economists regard the trade relationship between these Asian countries as the third largest in the world. This tie influences the social, economic, and political welfare of the East Asian region. The relationship between the two nations has experienced extraordinary growth in foreign direct investment and trade over the last thirty years. Despite having an unsettled political history, China and Japan have used all powers in their possession to ensure that past and present political differences do not jeopardize their trade relationship. Despite the tensions that have been seen in the past decade between the two nations, their economic relations have not been affected significantly. According to economists and scholars, the trade between the Chinese and Japanese grew from $5 billion to over $340 billion between 1978 and 2013.
The Impacts of Globalization on the Chinese and the Japanese Economy
This section will specifically analyze and compare the impacts of foreign trade manifested in the international markets. The global market entails a considerable geographical framework that supports the division of labor in addition to the movement of capital, technology, and goods and services. On the other hand, foreign trade refers to the exchange goods, services, capital, and technology between two countries, companies, or individuals from different countries. For most of the countries participating in the global market, foreign trade also referred to as global or international business represents a substantial part of the Gross Domestic Product. Foreign trade comprises of exports and imports. The inflow of goods, services, technology, and capital refers to imports. On the other hand, exports represent the products, services, technology, and capital moving outside or across the borders of the home country. Notably, commodities or exports imported for re-exportation purposes after several processing activities falls under export trade. In other words, the two types of foreign trade includes import trade and export trade.
Foreign trade plays a significant role in developing an economy of a country. Imports facilitate the acquisition of goods, services, capital, and technology that in return spurs economic growth in certain sectors of the economy such as the manufacturing, agriculture, and education amongst others. On the contrary, exporting goods, services, technology, and capital to another country generates revenue that leads to economic growth and development in the home country. Foreign trade is an aspect of globalization that the two East Asian countries (Japan and China) have managed to utilize foreign trade to stimulate and sustain their economic growth. Japanese and Chinese international trade is manifested through their participation in the world market involving commodities, services, capital, and technology.
Chinese Foreign Trade
By definition, foreign trade is simply the exchange of commodities and services in the global marketplace. It is most evident that exports or commodities and services from China circulate all over the world. Foreign trade has played a significant role in the economic growth and expansion that China enjoys. The country provides a significant market share for foreigners specifically manufacturers who import commodities locally. The demand for imports originating from China has fueled the growth of China’s economy and that of other countries. Initially, China undertook a mercantilist approach to restrict imports. However, the rapid expansion of the country’s exports turned this around as some major countries in the world began considering the imposition of the constraints on the imports from the Chinese market.
The ascension of China to the World Trade Organization called for the country to lower the implemented tariffs for the agricultural and the manufacturing sector. Therefore, Chinese membership to the World Trade Organization triggered calls to reduce these tariffs and as a result, assisted farmers and manufacturers to enjoy a competitive advantage by supplying cheap products and services. The accession to the World Trade Organization has led to the integration of the Chinese market in the world trade leading to the diversification of exports and imports capacities towards technological advanced commodities and services. Specifically, China provides the world with one of the biggest and rising markets across the globe. The economic growth in China is perhaps the cause of the improvement of the trade terms featuring its trading partners.
Chinese foreign trade contributions to the international market have increased steadily since the implementation of policies such as the open door policy that took place in 1978. For the last twenty years, the volume of international trade brought forward by China has experienced significant growth over the previous two decades with eighteen percent annual rate of expansion. Notably, the business increased from almost twenty billion dollars in 1978 to about two trillion dollars in 2008 reflecting the contribution of opening up of the economy (Sun and Heshmati 8).
China’s participation in the international trade and accession to the World Trade Organization has resulted in the enhancement of the domestic economy. In return, the trading partners will need to keep up with this growth momentum. Thus, the growth momentum means a dramatic increase in imports of domestic consumption by 37%. International companies will benefit by increasing their investments in China to meet the local demand. Chinese importation of energy and minerals would increase benefiting the countries rich with such resources. Additionally, Association of Southeast Asian Nations and states from South Asia have benefited from China’s participation in the world trade system since exports of all countries to China have upsurge speedily (Prasad 12).
Therefore, the development of the Chinese foreign trade has facilitated the modernization of the domestic economy. The Chinese foreign trade has improved its full strength and enhanced the living standards of Chinese people. Additionally, it is through this foreign trade that this country has managed to integrate its economy into the world economic system and make the globalization favorable to the general affluence of all the countries around the world.
The economic improvements, open door policy, and its active participation in the economic globalization has make the economy become the fastest growing economy across the world. Over the past decade, China in collaboration with other developing economies has become an important driver steering the world economy to its full potential. Specifically, the World Bank affirmed that since 2001 to 2010 the Chinese Gross Domestic Product increased by almost five billion US dollars. This increase represents approximately fifteen percent upsurge in the world aggregate. In the same periods, the Chinese gross domestic product rose to over nine percent. According to World Trade Organization, Chinese imports increased by about 17 percent while their exports rose by approximately 15 percent between 2000 and 2009. These numbers were much higher than the three percent yearly growth rate of the world economy.
Notably, the Chinese participation in the foreign trade was one of the first economies to stabilize during the international economic calamity. The country’s ability to stabilize quickly promoted the recovery of the international economy. Upon the occurrence of the international financial crisis in 2008, the government of China implemented several policies and strategies to rekindle the economy, increase its national demand and maintain the stability of the exports and the imports. In 2009, the international imports reduced by almost thirteen percent. On the other hand, the Chinese imports increased by approximately three percent. This increase made China the only nation to sustain its growth among the list of the largest economies in the world. China maintained the exports of several nations adversely affected by the global crisis. The Chinese economy triggered the demand for the global market and boosted confidence, promoting the re-establishment of the global economy.
As substantiate by World Trade Organization, during its third analysis of trade policy in China, it deposited that Chinese economy was very resourceful in stabilizing the international demand for goods and services during and after the international financial crisis that took place in 2008. The Japanese foreign trade, therefore, has been essential in maintaining the stability of the global economy. The development of the Chinese foreign trade has played a significant role in enhancing the welfare of its trading partners and its domestic economy. By accelerating its integration of the world division of labor, this East Asian country has progressively emerged as one of the largest exporter and producer of industrial commodities. This achievement has been associated with the labor cost advantage, strong industrial manufacturing and processing capacities, and the rising labor productivity. Therefore, China can provide cheap and high-quality industrial products that meet the demands of the local and overseas markets. Through these capacities, the country enjoys economies of scales and small processing costs in the local and the international manufacturing industry. These advantages have been instrument in offsetting the enhanced cost of upstream production factors leading to the prevention of the occurrence of international inflation and an increase of the purchasing strength of the trading partners.
The rising Chinese foreign trade has managed to provide its trading partners with a large market. The Chinese imports have multiplied by almost five times since 2001. This increase represents an annual growth level of about twenty percent. The rapid expansion of imports has turned to be a critical driving factor for local economic growth. Additionally, the increase has been essential to the trading partners through the creation of a vast market to amplify their exports. Currently, China provides the largest market for the world. Notable countries that take part in this crucial market include Brazil, Japan, Korea, and other ASEAN nations. Industrialization coupled with urbanization in China is proliferating, and the domestic economy keeps expanding. Therefore, the growth of the Chinese economy is not only important to the country but also to its trading partners since the continuous development provides an open market for them.
More so, the Chinese foreign trade is also manifested in the least-developed countries. This foreign trade provides the most prominent market access to the third world countries. Specifically, China has managed to provide zero-tariff treatment to more than four thousand commodities from thirty-six least-developed nations that have created a diplomatic relationship with China. The zero-tariff products amounted to sixty percent of the aggregate imports from these countries. The Chinese government devoted itself to keep on expanding this preferential treatment policy to these countries with established diplomatic connection with China. This commitment is aimed at reaching ninety-seven percent zero-tariff products of the aggregate imports from these countries. The preferential treatment has been a major boost to the exports of the least-developed countries to the Chinese nation. Since 2008, China has been considered as one of the largest provider of exports markets for these countries. The Chinese imports of commodities from these countries accumulated to almost twenty-five percent of the countries aggregate exports representing a fifty-eight percent increase.
China’s foreign trade has also been seen in its role in pushing forward the formulation and implementation of the world economic regulation mechanism. The central government of China has been taking advantage of its foreign trade to advocate for the establishment of an inclusive and balanced foreign trade structure that aims at developing an a fair and equitable world economy. As a prominent economy in the global market with significant business operations abroad, China plays an integral role in global business forums like the Group of 20 and Bric summits. Therefore, the foreign trade has helped the Chinese government take up international responsibilities that facilitate its development plan to sustain its economic growth.
The Japanese Foreign Trade
On the other hand, the Japanese foreign trade has been crucial to the success of its economy. Mostly, the foreign trade has been masterminded by the Japanese manufacturing industries operating in foreign countries. For instance, the number of companies providing foreign trade through direct investment increased. The number of subsidiaries almost doubled to fifteen thousand in 2000. Therefore, in an era of globalization, Japan has managed to participate in the foreign market mainly through globalized firms. The major participants in the foreign trade include the Japanese electronics and automobile industries, which have enjoyed a strong presence in the global market. To Japan, reaching the international market can be possible through not only exporting but also conducting overseas manufacturing operations. Production activities taking places across the border has been increasing since the 1980s. Primarily, the Japanese globalized enterprises expanded their manufacturing plants in the South East Asian nations such as Malaysia and Thailand. However, later, the companies shifted to China given the implementation of the open door policies.
The value of the Japanese foreign capital assets was approximately one hundred and seventy trillion yen exclusive of liabilities by the end of 2003. This foreign property represents the Japanese foreign trade with the world. An enormous amount of investment returns comes back to Japan every year. Its total value shows a massive surplus of receipts over payments over the recent years. These investments generate returns that flows back to the country that results in a sustainable growing economy.
Therefore, foreign trade through overseas capital investments is an important part of the economy of Japan. The Japanese economy forms one of the largest exporters of net capital. Mainly, the country provides the market for cars, office machinery, optical and scientific equipment. The manufactured commodities make up the most of the Japanese exports. Additionally, its foreign trade accounts for fifteen percent of the world’s aggregate produced commodities. The automotive industry represents the most critical industry followed by the electronic and computer industries.
Japan foreign trade plays a remarkable role in the global trade system through its volume of international trade. Mainly, Japan is one of the members of the seven most industrialized countries in the world and is considered as the second largest source of foreign direct investment featuring accumulative stock amount to four hundred and fourteen billion dollars. Notably, Japan has acted as the most significant source of direct foreign investment mainly to the American market, which is part of the world trading system. The foreign direct investment is marked by the capital influx of at least thirty-one billion in 2015. These capital inflows into the world markets such as the United States are essential in creating employment opportunities as well as in contributing to the output and exports.
Notably, Japan is considered one of the three largest economies in the world including China and the United States. More so, Japanese economy is one of the biggest importers around the world. Thus, Japan is considered as one of the prominent participants in the international markets. Additionally, Japan participates in the international trade by promoting the protection of real and intellectual property rights. More so, the consumer economy in Japan is significant, and its per capita income reinforces the strength of its market that is essential to the international trading system. Furthermore, Japan substantially depends on the imported natural resources. For instance, the Japanese economy is the leading consumer of food products throughout the world.
Currently, Japan participation in the world trade is expected to benefit its trading partners and others since it is estimated that the exports are going to rise by almost three percent yearly making Japan the fifth largest importer in the world. Correspondingly, the imports are expected to grow because of increased demand by an average of 5% every year implying that this economy will be the fourth largest importer in the world. These projections were made in 2012; anticipating that Japan would play a significant role in the world trade system by importing primarily electronics, metals, and fuels, which in summation will amount to fifty-two percent of the total imports, carried out by Japan in 2017. These imports will come from China, South Korea, and the United States.
Therefore, Japanese foreign trade can be traced in the world trade system. Foreign trade between Japan and its trading partners has prominently determined its position in the global economy. International trade is the backbone of the Japanese economic growth. In addition, the foreign exchange of goods and services has facilitated the effectiveness of its economic relations with other countries. Industrial manufacturers and household consumers are large importers of ore, oil, and food grains. Japan is also a well-known exporter of goods and services to the international market. The increase of exports has been spearheaded by the rejuvenated growth and enhanced demand for Japanese goods by East Asian countries such as China, Taiwan, and South Korea. The trade between China and Japan amounted to approximately seventeen percent of the total trade conducted by Japan in 2009.
The Japanese foreign trade has been characterized by foreign investments. This form of trade has been caused by factors such as the desire to take advantage of the economies of scale of its corporations and to penetrate international markets. Mainly, Japanese foreign investments have focused on exploiting natural resources and labor intensive manufacturing activities in countries with abundant raw materials and resources. The increase of foreign direct investment has been facilitated by Japan’s considerable expenditure on research and development by its key manufacturing companies. Additionally, Japanese foreign investment has been driven by policy actions that encourage its corporations to move their production functions overseas.
Looking at both China and Japan, the foreign trade relationship between the two in both imports and exports has been expanding tremendously for the past few years. Specifically, as mentioned earlier, the two are highly dependent on each other in regards to the number of goods and services the two imports and exports to and from each other. Perhaps, the dramatic increase of the trade between the two nations is caused by the self-sustaining Chinese economic growth. The private consumption between the two countries has also experienced remarkable growth as the percentage of the population with an increased level of income continues to rise. The upsurge of the demand for electronics including household devices such as mobile phones, televisions, cameras, video players, and recorders have benefited the Japanese economy since they are the global specialist for these products (comparative advantage). Japan has an excellent reputation in the manufacturing of electronics given its technological knowledge. Another critical factor attributed to the increased trade between the two giant economies concerns China’s membership to the World Trade Organization (WTO). The representation at the World Trade Organization was essential in encouraging China to adopt reformed policies to facilitate its trade relations with other countries around the world.
From the analysis, it is evident that foreign trade has had huge impacts on the economies of Japan and China. Notably, the two countries have interacted through exchange of goods and services, capital, technology, and direct investment. It is evident from the analysis that the two world economies depend on each other. China depends on the Japanese manufacturing prowess while Japan counts on the China market to grow their economy. The economic tie between Chinese and Japanese nation, thus, have been strengthened through the Chinese foreign trade and Japanese foreign investment in China.
The trade between these two has been facilitated by globalization. While the concept only emerged in the two countries in the 1970s, it has had tremendous effects to the extent of putting the two countries at the top of the world economic map. Globalization has improved the economies of these two East Asian countries through aspects such exchange of goods and services, foreign investments, economies of scale, specialization, and improvement of the national welfare. However, there is a slight difference between the Chinese and Japanese foreign investment. Chinese overseas trade mainly focuses on improving its exports and imports through several strategies. One of the strategies was the open door policies that invited and encouraged the world to engage China in business activities and promote imports and exports. Additionally, its accession to the World Trade Organization facilitated its economic growth. The move to join the world Trade Organization became liberated promoting a conducive environment for imports supplying the local market. In other words, the liberation strategy has facilitated the transfer of factors of production from agricultural sector to industry and across the industry, from capital intensive to labor intensive divisions. Hence, the Chinese foreign trade has considerably influenced its economy and that of its trading partners.
On the other hand, the Japanese international trade has been in the form of mainly foreign direct investment. Most of its manufacturing companies have established their plant operations in foreign countries to generate foreign profits. The country has provided several incentives to these companies. Foreign direct investment has been the backbone of the Japanese economy. It has enabled the Japanese manufacturing firms to attain cost savings while at the same time expanding their market opportunities across the world. Japanese foreign investments have been motivated by policy actions, enhanced research and development by the Japanese organizations, and the need to take advantage of its economies of scale to utilize natural resources and raw materials from other countries. Additionally, the foreign investment has been fueled by Japanese enterprises that focus on exploiting natural resources and labor-intensive manufacturing activities.
Through the international trade, the two economies emerged as one of the fastest growing economies in the world. The different foreign trade approach has influenced the two economies positively by enabling them to exchange commodities and services they have in abundance between themselves and other trading partners for goods and services they do not produce in sufficient proportions. Globalization has proven to be an essential element of economic growth. As evidenced in the paper, globalization promotes economic growth of countries, the accumulation of capital, and the growth of industries, trade, and technology. The economies of Japan and China have experienced dramatic economic growth and expansion because of embracing globalization that has enhanced international trade.
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