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Exporting deflation: Chinese exports and Japanese prices, David Weinstein, Christian Broda, National Bureau of Economic Research, April 2008
The threat to Japan's economy is Japan, not China, The Research Institute of Economy, Trade and Industry (RIETI),
China-Japan economic, trade ties have great potential to tap, www. Chinaview.cn
Stephen King: China can learn from Japan's economic pain, http://www.independent.co.uk
Overview picture on China & Japan Economy
The fierce competition in certain areas
Trade ties have been great between China & Japan
Exporting Deflation: Chinese exports & Japanese prices
The threat to Japan’s economy is Japan, not China
What China can learn from Japan’s economic pain?
Over view picture of China & Japan Economy Development
Japan-China Value of Share Trade
Japan emerged in the post-war period to become the unquestioned giant of Asia, and remains the world's number two economic power, measured by GDP, after the US. China is fourth, just behind Germany.
Asian giant is different?
But Chinese growth has soared since the 1980s and it shows little sign of slowing. While China sprints forward, Japan inches along. While China has been enjoying double-digit annual economic growth - 11.9% in 2007 - Japan's growth has been more modest - just 2.1% in 2007.
This fierce competition has led to conflicts in certain areas.
Both countries have a continuous thirst for energy, with Japan depending almost completely on imports for its oil and natural gas.
This situation has led to a dispute over the maritime borders in the East China Sea, where there are thought to be reserves of oil and gas. Both countries also claim islands within this disputed zone.
But between them they account for close to three-quarters of East Asia's economic activity,
In 2004 China overtook the US to become Japan's largest trading partner. China has become a huge new market for Japanese exports with bilateral trade reaching $236.6bn in 2007.
Japan Export Slow!
Japan's exports fell year on year for the first time in more than four years in June (although they had been down month on month in both May and April, and ironically they were up in June over May) Exports decreased 1.7 percent in June 2007, according to the Finance Ministry this morning. The drop was the first since November 2003.
Japan Export Market
According to statistics released by China's Ministry of Commerce, two-way trade between the two countries climbed by 13.8 percent year-on-year to 236 billion US dollars in 2007. Japan became China's biggest exporter and its fourth biggest export market.
A study on “Exporting Deflation: China export and Japanese prices”
David Weinstein, Christian Broda, National Bureau of Economic Research, April 2008
Main Argument on this paper:
China was exporting deflation by exporting gods at low prices was repeated by market analysts and policymakers
“The entry of emerging market economies-such as China and other east Asian nations-into the global trading system is a powerful additional deflationary force. China is deflation and its effects are not limited to neighboring Hong Kong and Taiwan” Vice Minister for International Affairs at the Japanese Ministry of Finance:
The different in the behavior of import price and domestic prices was due to formula biases
The data does not suggest that the prices of goods exported by China in 1992 fell at a faster rate than those exported by other countries over 1992 - 2005
The typical price per unit quality of a Chinese exporter fell by half between 1992 and 2005.
Thus the explosive growth in Chinese exports is attributable to growth in the quality of Chinese exports and the increase in new products being exported by China
The increase in new imported products entering Japan is only associated with relatively small price movements.
Expansion of China in new markets do not appear to have produced much of an impact on aggregate Japanese prices
In short, China does not seem to be exploring deflation to Japan