A container truck loaded drives to the terminal in Tangshan Port, Hebei province on Sept 8, 2017. (ZHENGYONG / XINHUA)
The Chinese mainland’s competitiveness in global exports has improved, challenging Japan’s advantage, especially in the semiconductor sector. Rising mainland investment in research and development seems to be the key factor, an economist said.
The mainland increased competitiveness in all Japan’s top 10 export products such as motor vehicles and semiconductors, as well as parts and vehicle accessories, French corporate and investment bank Natixis’s data shows
The revealed comparative advantage (RCA) gap between the mainland and Japan for Japan’s key export sectors is narrowing. RCA measures the relative advantage or disadvantage a certain country has in a particular sector.
The mainland increased competitiveness in all Japan’s top 10 export products such as motor vehicles and semiconductors, as well as parts and vehicle accessories, French corporate and investment bank Natixis’s data shows.
Natixis said Japan’s RCA in semiconductors, the country’s second-largest export product, fell more than 75 percent in 2016. The RCA gap for semiconductors shrank to as small as 0.22, indicating Japan’s comparative advantage over the mainland in this industry is gradually eroding.
“China is always the largest trading partner for Japan,” said Alicia Garcia Herrero, chief economist Asia-Pacific of Natixis. “The trade relationship between the two countries used to be quite complementary.”
Formerly Japanese companies exported large quantities of machinery to the mainland but this model is gradually changing. Mainland firms have replaced the imported machinery with their own domestic production; the two countries have started to compete for global market share in high-value added products.
Increasing mainland R&D spending is believed to be the main reason for Japan’s relative loss, Natixis said. The mainland’s R&D spending is rapidly catching up with Japan’s. The mainland spent 2.06 percent of GDP on R&D in 2016, approaching Japan’s 3.28 percent, data from the World Bank indicates.
Financial experts expect solid export prospects for the mainland this year.
“Last December, Chinese export growth to the United States and Europe remained solid, while shipments to Japan accelerated,” said Louis Kuijs, head of Asia economics at Oxford Economics, an economic forecast provider. “Looking ahead, while we expect global demand growth to ease in 2018, China’s headline year-on-year export data should continue to look good in the coming months.”