As a result of the opening up of the Chinese economy together with the accumulating foreign exchange reserves, Japan’s outward foreign direct investment (OFDI) in China has continued to rise over the past decades. It can be characterised by a very high share of the manufacturing sector, the heavy and chemical industries in particular. It implies that Japan’s OFDI in China has contributed significantly to the rapid economic growth of China, especially through the economy’s structural change into more value-added industries. Due to the similar level of economic development and geographical proximity, China appears to have replaced some Southeast Asian countries as a preferred host of Japan’s FDI.
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