2006 July 23 Sunday
Japan Gains Against US In Exports To China

Why did Japan do better than the United States in exporting to China?

Japanís auto sector now accounts for one-third of U.S. auto market sales. But Japan still depends on exports and, since 2001, has been much more exposed to the Chinese market. Japanese exports to China, which were very small before 2000, make up almost 15% of total Japanese exports, while the U.S. share has declined by nearly the same amount.

Japanís export base increased at a 20% annual rate between 2002 and 2004, with almost a quarter of this growth coming from China. During this period, Chinese imports were growing at about a 50% annual rate, while Japanís exports to China were rising at almost a 60% annual rate.

ďChinaís explosion onto the world economic stage was a huge boon for Japan, which not only benefited in terms of export stimulus, but from a direct source of domestic stimulus to an economy that had struggled to find the momentum to lift itself out of its long-term recession,Ē says Fosler.

But Fosler says much of the optimism about Japanese economic growth may be a delayed reaction to the better than expected performance of 2004-2005 rather than a hard-nosed appraisal of the future. Recently, Japanís machinery export orders and industrial activity have been flat, and its profit growth is slowing rapidly and its productivity growth is stagnating. And Chinaís exports, which have been important to all of Asia, are now rising at only about a 15% annual rate.

My guess: Japanese businesses are less eager than American businesses to move factories from the home country to China. So what would have been US export growth to China instead became US companies making their goods in China for the China market. Mind you, that's just a guess.

Anyone have a source for what percentage of manufacturing of US and Japanese companies takes place in the home countries versus various other countries?

Share |      By Randall Parker at 2006 July 23 01:02 PM  Economics Trade

Amit Uttam said at July 23, 2006 7:46 PM:

Maybe Japan gained the edge against the US in the Chinese markets for the same reason Japanese automakers dominate the US market. GM our biggest car maker is pitiful in its ability to create new and exciting product. What GM needs to do is kill all its existing car model lines and copy the Japanese model of having 3 models for the economy class and 3 to 4 models for the luxury class. Each model needs to have futuristic and exciting design. Each model should break records in terms of fuel efficiency and reliability. Then they need to introduce and distribute the model on an international scale with an advertising blitz that rivals the Xbox 360. Let's see what happens then in terms of competition. I would give the same advice to Ford. The new company motto for all American car companies should be: "Lean, mean driving machine"

President of General Motors said at July 24, 2006 6:19 PM:

Amit Uttam :

"Each model needs to have futuristic and exciting design."

Wow. Why didn't we think of that? Would you like to be a VP of Exciting Design at GM?

John S Bolton said at July 24, 2006 11:08 PM:

The more important factor is the ability and willingness of the Bank of Japan to finance exports through dollar support on the scale of hundreds of billions of dollars.
Their citizens are deferential to authority, and to such extent that there is no complaint of the scale of forced savings and plundering needed to maintain the exchange rates artificially; not even when it results in their paying twice as much for energy imports, etc, as they otherwise would.
The downside is that one day it will end, perhaps as badly as the similar US policy in the 1920's, which floated Germany, Austria and Latin America on credit that banks would never have extended on their own instigation.

Kenelm Digby said at July 25, 2006 4:26 AM:

The short answer is that the USA, in the main, quite simply lacks the manufacturing, technical and industrial capacity to actually produce the goods (ie capital machinery), that the Chinese wish to buy.

Half Sigma said at July 25, 2006 1:36 PM:

China already exports more cars than it imports:


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