A Comparative Study on the Efficiency of Direct Investment from China and Japan to ASEAN Countries under the Background of "Belt and Road"

Abstract

This study employs outward foreign direct investment (OFDI) data from China and Japan to the ten ASEAN countries over the period 2013-2018. By applying a stochastic frontier gravity model, the paper conducts a comparative analysis of investment efficiency, investment potential, and their key determinants for the two countries' direct investment in ASEAN economies. The results show that China's investment efficiency in the ASEAN region has surpassed that of Japan during the sample period, indicating that China's Belt and Road Initiative has achieved substantial progress in enhancing investment cooperation with ASEAN countries since its implementation. Furthermore, the analysis reveals that both China and Japan have significant investment potential in ASEAN countries, but the factors driving their investment efficiency differ. For China, the Belt and Road Initiative has played a crucial role in fostering infrastructure development and policy coordination, which have become key contributors to its higher investment efficiency. In contrast, Japan's investment efficiency is more influenced by its long-standing economic ties, technological collaboration, and corporate networks within the region. These differences highlight the distinct strategies adopted by the two nations in engaging with ASEAN economies. Additionally, the study identifies several common determinants, such as market size, geographic proximity, and trade agreements, that positively impact the investment efficiency of both countries. The findings provide valuable insights for policymakers and businesses aiming to strengthen economic partnerships in the ASEAN region.