China leaps past U.S. in trade with Japan By Todd Zaun The New York Times Thursday, January 27, 2005
Japanese firms using country as a major production center TOKYO China surpassed the United States as Japan's top trading partner for the first time last year, data showed on Wednesday, highlighting the growing economic ties between Japan and its rapidly expanding neighbor. . The growth in Japan's trade with China has been driven in part by China's surging growth but even more, economists say, by the expanding use of China as a production base for Japanese cars, computers and electronic gadgets that are then shipped around the world. . And so while the trade figures show Japan's economic health becoming more closely linked to China, that does not necessarily mean the importance of the U.S. market has diminished for Japan, economists say. . In 2004, China, including Hong Kong, accounted for 20.1 percent of Japan's total foreign trade, compared with an 18.6 percent share for the United States, according to figures from the Ministry of Finance in Tokyo. . By value, Japan's trade with China and Hong Kong, including exports and imports, rose to a record ¥22.2 trillion, or $213 billion, in 2004, outstripping the ¥20.5 trillion in trade with the United States, long its top partner. . "China has become a major production base for foreign companies including Japanese," said Peter Morgan, economist at HSBC Securities in Tokyo. "But if one looks at the final destination of the products, the U.S. is clearly more important still." . Morgan calculates that about 60 percent of Japanese exports to China are tied to products that are ultimately bound for somewhere else, like the U.S. market. . For years, companies like Matsushita Electric Industrial have been shipping computer chips and other key components to factories in China, where they are slotted into television sets, DVD players and cellphones bound for other markets. Now, Japanese companies are using factories in China for even more sophisticated production. . By 2007, Honda Motor, for example, aims to nearly double its exports of motorcycles from China, to around 300,000 from 170,000 last year. And this year, the company plans to start exporting a small hatchback called the Jazz from a factory in China to showrooms in Europe. . "The shift in production from Japan to China has been conducted in stages," Ryo Hino, an economist in Tokyo for J.P. Morgan, said. . "It started with the low-end stuff, then moved into machinery, and obviously autos are the next stage," the J.P. Morgan economist added. "Japan is doing the rational thing by attaching itself to a high-growth developing economy," . The United States remains the largest foreign market for Japanese goods. Japan's trade with China was higher than with the United States only because Japan imports much more from China than from the United States. That also means that Japan has a much larger trade surplus with the United States, at ¥6.96 trillion last year, than with China, at ¥1.46 trillion. . Still, in terms of export growth, China is where the action is. . Japan's exports to China, including Hong Kong, jumped 21 percent last year, to ¥11.83 trillion, while Japan's exports to the United States rose just 2.3 percent, to ¥13.72 trillion. Over all, China accounted for a quarter of Japan's export growth last year, making it very important to a country whose two-year-old recovery has been built largely on exports. . The crucial question for Japan now is how long China's appetite for imports will last. China reported on Tuesday that its economy expanded at a blistering 9.5 percent rate in the fourth quarter of last year, even as Beijing policy makers appeared to be winning their battle to control inflation. . Even so, the growth in Japan's exports to China has been cooling, slowing to 9 percent in December from a year earlier, compared with a 22 percent gain in November. . Japan's overall trade surplus expanded at a modest pace of 1.8 percent in December from a year earlier, to ¥1.14 trillion. The expansion was based on an increase in shipments of autos and steel, while imports grew 10.9 percent, largely as a result of the rise in oil prices. . [Non-text portions of this message have been removed] ------------------------ Yahoo! Groups Sponsor --------------------~--> Give the gift of life to a sick child. Support St. Jude Children's Research Hospital's 'Thanks & Giving.' http://us.click.yahoo.com/lGEjbB/6WnJAA/E2hLAA/BRUplB/TM --------------------------------------------------------------------~-> *************************************************************************** Berdikusi dg Santun & Elegan, dg Semangat Persahabatan. 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