Japan's economic assistance to China is contributing to the development of the Chinese economy and bilateral economic relations. Japan-China trade has been increasing significantly in recent years, and since 1991 it has been reaching new heights every year. China is Japan's second largest trading partner, after the United States, and Japan is China's biggest trading partner. In the January-May 1997 period, bilateral trade totaled 3.0038 trillion, of which Japanese exports to China accounted for 958.1 billion and imports from China for 2.0457 trillion, thereby continuously increasing Japan's trade deficit with China. Due to such factors as improvements in the investment environment and the continued appreciation of the yen, Japan's direct investment in China has been growing significantly since 1984.
China is the biggest destination for Japanese direct investment among Asian countries.
Originally, direct investments in China were made with the objective of reducing labor costs by commissioning the assembly of goods for export. But in recent years the aim has shifted toward gaining a foothold on the Chinese market. During this period, Japan's ODA has contributed significantly to economic development in China and to the expansion of bilateral economic relations in general. As for grant aid to China, in August 1995 Japan announced that it would in principle cease to extend grant aid as long as China did not terminate its nuclear tests. In March 1997 Japan officially announced its resumption of grant aid after China declared a moratorium on nuclear tests in July 1996.