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Factors in the Acceleration and Deceleration of the Chinese Economy and Their Impact on Japan's National and Regional Exports

March 27, 2009

Overview

In 2008, the value of Japan's exports to China amounted to some ¥12.9 trillion, making China this country's second largest export destination after the United States (¥14.2 trillion). The sharp fall in China's own exports due to the worldwide economic downturn is also impacting on Japan's exports to China. At the same time, the package of economic stimulus measures worth 4 trillion yuan, announced by China in November 2008, is expected to benefit Japan's exports to China.

If the downturn in China's own exports becomes prolonged, Japan's exports to China are expected to fall by ¥1,587.0 billion over 12 months. By category, the largest falls are likely to be in electrical machinery and electronic devices and components (–¥557.8 billion), followed by steel and non-ferrous metals (–¥251.2 billion) and chemicals (–¥238.9 billion). The reason that the impact on electrical machinery and electronic devices and components will be so great is that the products China exports contain large numbers of electronic devices and components made in Japan.

Meanwhile, the boost to Japanese exports provided by China's economic stimulus measures is expected to total ¥2,050.8 billion. This includes ¥473.8 billion in general machinery, ¥405.3 billion in steel and non-ferrous metals, ¥328.0 billion in electrical machinery and electronic devices and components, ¥215.9 billion in chemicals, and ¥135.5 billion in information and telecommunications equipment.

The boost to Japan's exports produced by China's economic stimulus measures is expected to exceed the impact of the fall in China's own exports by ¥463.8 billion. However, a breakdown of the figures reveals that while general machinery and steel and non-ferrous metals, among other categories, will see net export growth, the benefits of the stimulus package will not fully offset the impact of downturn in China's own exports on Japan's exports of electrical machinery and electronic devices and components.

The Kansai region exports relatively little to the United States and a high proportion of its exports go to China. If the downturn in China's own exports continues, the Kansai region's exports are expected to suffer an impact of the order of –¥433.7 billion. Meanwhile, the boost to the Kansai region's exports provided by China's economic stimulus measures is expected to be worth ¥537.6 billion and, when added together, the positive and negative impacts are expected to give a net positive impact of ¥103.9 billion.

If the downturn in China's own exports continues, the Chubu region's exports are expected to suffer an impact of the order of –¥249.0 billion. Meanwhile, the boost to the Chubu region's exports provided by China's economic stimulus measures is expected to be worth ¥352.2 billion. When added together, the positive and negative impacts are expected to give a net positive impact of ¥103.2 billion, roughly the same as for the Kansai region.

If the downturn in China's own exports is prolonged, the Kanto region's exports are expected to suffer an impact of the order of –¥569.5 billion. Meanwhile, the boost to the Kanto region's exports provided by China's economic stimulus measures is expected to be worth ¥730.1 billion. When added together, the positive and negative impacts are expected to give a net positive impact of ¥160.6 billion, greater than for either the Kansai region or the Chubu region.

Overall, the positive impact of the economic stimulus package on Japan's exports to China is expected to exceed the negative impact of the downturn in China's own exports. However, the negative impact of the downturn on Japan's exports of electrical machinery and electronic devices and components will be severe, and their recovery will depend on growth in China's own exports as the world economy begins to recover.

For more information on the content of this report, please contact Kiyoshi Yoshimoto , the Japan Research Institute, Limited.

Tel: 06-6534-5204

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