East-West Center Research Program Seminar

This presentation investigates linkages among “reverse imports”, foreign direct investment, and exchange rates. As an example we have in mind the competition in the Japanese market of a Japanese multinational firm and a Chinese domestic firm. Products are differentiated based on Japanese consumers’ brand name recognition. The model shows that yen appreciation leads to an increase in Japanese production in China and “reverse imports”, and a decrease in Japanese domestic production. Due to the barriers in brand name, the exports of the Chinese firm could fall, because the increase of reverse imports may erode the market share of the Chinese firm, even though total exports from China increase. Further, we find that yen appreciation may improve the profits of the Japanese firm and welfare in Japan under reverse imports, against conventional wisdom. The predictions of the model fit well with the actual numbers, and shed light on the current debate on the Chinese currency.

Yuqing Xing is a Professor of economics and the Director of International Development Program of the Graduate School of International Relations at the International University of Japan (IUJ). He is also the Director of the Research Institute of IUJ. Prof. Xing obtained his PhD in economics from University of Illinois at Urbana-Champaign, and M.A and B.A. from Peking University. He has been a visiting professor/research fellow in various institutions, such Bank of Finland, World Institute for Development Economics Research, National Graduate Institute of Policy Studies (Tokyo), Institute of Advanced Studies of the United Nations University, Research Center of China Galaxy Securities Company, etc. Prof. Xing`s research focuses on trade, exchange rates, FDI and regional economic integration. His research has been published in internationally refereed journals, such as Japan and the World Economy, Journal of Asian Economics, the World Economy, Review of International Economics, China Economic Review, Resource and Environmental Economics, etc.

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East-West Center, Research Program

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Laura Moriyama, 944-7444, moriyaml@eastwestcenter.org

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