Chinese and Japanese investment in Southeast and South Asia: case studies of the electronics and automobile industries

Abstract

This article uses extensive fieldwork data to focus on the question of how Chinese and Japanese companies are competing in neighboring countries of Asia, and what economic forces will shape their future growth in the region. It begins by briefly discussing the history of Chinese and Japanese investment in the South and Southeast Asian regions. It traces the development of Japanese overseas investment policies, as well as China's more recent ‘Going Out’ government program to encourage overseas flows of capital. It then builds on prior political economy work as it uses case study focuses, with primary data based on the author's fieldwork research in several nations of Southeast Asia and in India, of the two key sectors of automobiles and electronics. It compares and contrasts the investment strategies of companies from each country, as well as the successes and failures of investments in the industries. It finds that Japanese companies’ advantages lie in industries utilizing advanced technology and management skills. Though the Japanese continue to lead in many areas, including automobiles, they have begun to face competition and potentially reduced profits in vital manufacturing areas. Meanwhile, Chinese overseas companies have made significant advances in the consumer electronics sector, using low prices and good quality, though overseas automobile investments have gained little traction. The article concludes that, if the Chinese can improve their product quality, capitalize on improving managerial skills and a deeper level of experience in the region, and establish brands they can sell with reliable distribution networks, Japanese companies could face losses to their Asian neighbor in these important parts of the continent they have dominated for decades.