outsiders. In this connection, intra-regional trade is a crucial factor behind long term
economic expansion in Asia.
B. Intra-Regional Flow of Foreign Direct Investment
Starting from the mid-1980s, there has been a significant increase in intra-regional
capital flow in Asia, mainly in the form of foreign direct investment (FDI). Specifically,
FDI from Japan is increasingly flowing to the ANIES and the ASEAN countries
(Table 6). Also, more and more FDI is flowing from the ANIES to the ASEAN-4 and
circulating among the four ANIES. FDI in China has also increased substantially over
the years, with foreign investors mainly from Hong Kong and the core recipient areas
are those along the coast such as the Guangdong and Fujien provinces. In 1989, the
share of foreign affiliates in China's total industrial output was 3.5%, a substantial
increase from the 0.5% in 1980.
It is noteworthy of two emerging trends. First, investment from the ANIES combined
has surpassed Japan in the ASEAN region. In 1989, Japan was still the largest investor
in the ASEAN region. However, in the first half of 1990, investment by the ANIES
reached $3.73 billion, a 33.8% share, exceeding Japan's investment of $2.88 billion, a
26.2% share. Secondly, the structure of FDI in Asia is changing. FDI in the services
sector is expanding rapidly, especially in financial services. As a result of corporate
financial transaction increases, globalization activities, the demand for international
giving rise to the formation of international networks by banks and other financial
institutions. Within the manufacturing sector, more and more foreign direct investment
is moving into the higher end production. This is especially the case for FDI in the
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