Changing Trends in Japanese FDI to China and India and an Assessment of CausesQi

　　Abstract: Since 2005, Japanese FDI to India has increased rapidly, not only in terms of overall scale, but also in terms of its position and sectoral focus. In stark contrast, Japanese FDI to China continues to waiver without any significant progress. Research comparing the experiences of the two countries finds that China has begun to lose its comparative advantage with respect to low wages, while protection of intellectual property remains insufficient, and domestic competition fierce. At the same time, the appreciation of the RMB and changes in the policies of the Indian government are also significant drivers explaining this trend. This trend should be considered in an objective and rational way, and it should be made clear that enhancing the scope of protection of intellectual property and the strength of legal enforcement is the primary means through which China can continue to attract FDI from developed countries, and realize the optimization and upgrade of its industrial structure.

　　Author: Qi Jianhong is the Deputy Director of and Professor in the School of Economics of Shandong University；

　　Chen Xiaoliang is a Graduate Student in the School of Economics of Shandong University