Since 1978, Mainland China has considerably altered her foreign economic policy, reflecting her strong desire to rapidly modernize her economy. Although the new foreign economic policy still lays emphasis on the principles of self-sufficiency and self-support, the technological gap that exists between her and western developed countries has made her realize that she must still import foreign technology and capital. This study, in trying to explore the problems associated with this, specifically examines two key questions, namely: (1) How close are the economic relationships between Japan and Mainland China? (2) How much influence does Mainland China have on economic relations between Japan and Taiwan?
A brief summary of the major findings is given below:
(1) Trade between Japan and Mainland China has grown tremendously since the establishment of diplomatic relations. Recently, Japan has had a share of over 20% of Mainland China’s foreign trade and is now the biggest trading partner. As long as Mainland China maintains her present foreign policy, trade will grow continuously.
(2) As for the flow of foreign capital, official loans and grants between Japan and Mainland China have progressed positively, and foreign direct investments have increased at a much faster rate. Joint ventures are seen as being the main component of foreign direct investment in the future.
(3)Together with the increase in trade, there is also a significant increase in the transference of hard technology from Japan to Mainland China. However, soft technology such as management, patents etc. will play a key role in the transfer of technology in the future.
(4) A comparison of Taiwan’s exports with those of Mainland China reveal that Taiwan’s products have had a more favorable impact on the Japanese market. However, Taiwan’s industrial organization is changing, and her goods are gradually losing their price competitiveness. To maintain her competitive edge, attention must be focussed upon non-price factors such as after sales service and quality control.
