An Analysis of Intra-Industry Trade between Japan, Malaysia and China

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M. Affendy Arip
Sim Yee Lau
Madono Satoru


This paper investigates the bilateral trade pattern between Japan,
Malaysia and China (JMC) using the intra-industry trade (IIT) index
analysis. Our empirical fndings revealed the following. First, China shows
a higher degree of IIT relation with Japan vis-à-vis Malaysia. Second, to the
extent of whether rapid manufacturing development in China is affecting
Malaysia’s export to Japan, our analytical evidence demonstrates that the
degree of overlapping exports to Japan by Malaysia and China has increased
over time. Although this trend appears to be an indication of increasing
competition from China in relation to Malaysia’s products in the Japanese
market, our empirical evidence – detailing the degree of product similarity
between Malaysia and China using the unit value (UV) measurement
– shows that both countries’ exports actually comprise mainly vertically
differentiated products or different segments of the market in Japan.
Nevertheless, the results also reveal that, compared to Malaysia, China is
rapidly increasing its export share in horizontally differentiated products or
similar market segments.


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