Trade Strategies of Japan and China in Their Heydays: An Ex-post Analysis

Abstract

Post-war Japan and post-reform China have become miracle economies based an export-led growth model. But the global financial crisis in 2008 has challenged the Chinese approach as the bubble burst did to Japan’s. This paper makes an ex-post examination of the trade strategies followed by both the countries in their export-led model. As expected, a number of policies or lack of them seems to have conditioned competition, composition and direction of their trade. The Japanese trade strategy has been dominated by governmentdirected indicative planning, promotion of selective industries, use of exchange rate for competitiveness, protection of domestic businesses from external competition, and even the use of ODA to help trade abroad. In the heydays, Japanese international trade policy controlled “3-Is” viz. imports, investment of foreign capital, and integration through RTAs to benefit domestic businesses. China, on its part, has followed a set of policies that encouraged foreign investment through various incentives in labor-intensive processing and trading industries to combine its edges in land and labor while continuing import substitution in capital and technological industries. Like Japan, China also manipulated the exchange rate to favor its exporters. Both of them, however, have scope for leveraging international integration as a means of further trade growth and development.