Export Relationships Among China, Japan, and South Korea

Abstract

This paper examines trades and trade relationships among China, Japan, and South Korea. It shows that China possesses a large comparative advantage in labor-intensive products, while Japan and Korea maintain large comparative advantages in capital-intensive products. Using quarterly data from 1981 to 2001, the paper evaluates the effect of yen depreciation on the exports of China and South Korea. Our empirical results prove a positive impact of depreciation of yen on China's exports but a negative impact on Korea's exports. This finding suggests that Japan is competing with South Korea in terms of exports, but not with China.