I recently heard from an American university professor that fewer students in the United States are learning Japanese while the number of students studying Chinese has risen in the last few years.

　In China, too, the introduction and study of Japanese-style business management that was all the rage until the mid-1990s has subsided and been replaced by an eagerness to introduce American-style business management and entrepreneurial success stories. Also, Japanese home appliances have lost their popularity and Chinese students are less eager to study in Japan.

　Why has interest in Japan waned in both the United States and China? Some people liken Japan in the last decade to a still picture and China to a digital movie. There has been little change and competition in Japan. Perhaps Japan's inactivity could not satisfy the interest of continental people, who are always seeking excitement. By contrast, despite its many problems, China has captured the attention of international society with its dynamic reforms that present "high risks and high returns."

　Foreign capital investment in China, which stood at $3.5 billion in 1990, jumped to $44.2 billion in 1997, making it the second largest recipient of foreign investment following the United States. While growth has dipped once since then, the first half of this year showed a 20-percent increase from the same period last year.

　The advancement of foreign capital not only gave rise to more jobs and stimulated competition in China but also led to the advancement of related domestic industries with the spread of technical and management know-how.

　China started opening up its home electronics market 20 years ago. It lowered tariffs in increments to increase local production by foreign manufacturers. The rush of mostly Japanese makers to China dealt a major blow to the Chinese home electronics industry, which was forced into drastic restructuring and streamlining.

　However, the intensified competition, which required Chinese businesses to seek better quality and efficiency for more than 10 years, gave them confidence to compete with Japanese makers.

　China is about to join the World Trade Organization at the risk of undermining the foundation of its Communist government. The development is aimed at introducing competition to other areas of Chinese industries to further attract domestic and foreign investment and technology.

　Direct investment serves as a barometer to gauge the attractiveness of a country as a market. In 1999, direct investment to Japan accounted for only 1.5 percent of worldwide total. It was less than one-third of that to China.

　"No risk, no return" markets cannot lure investors. Therefore, in order to make itself attractive to outsiders, Japan, as an economic power, needs to have the awareness that "without reform there is no tomorrow."

　More than 10 years ago, Britain, the United States and other advanced economies carried out various structural reforms to create a competitive environment to encourage direct investment of foreign capital and recovered their economic vitality. Actually, in Japan, too, automobile and chemical industries are highly competitive thanks to exposure to international competition.

　On the other hand, the competitiveness of food and textile industries, which are under government protection, is getting increasingly weaker.

　More than a century ago, Japan carried out the Meiji Restoration,a process of drastic self-reform, and surpassed China, which had closed its doors to foreigners. However, as far as reform is concerned, it appears their awareness reversed in the last 10 to 20 years of the 20th century.

　Japan is actually in a position to create a more attractive environment than China in many areas, including information technology. But to do so, it needs to change its introverted mind-set and drastically reform itself in terms of thinking, politics and the economy. In that sense, I support Prime Minister Junichiro Koizumi's structural reform, although I want him to act prudently on such matters as constitutional revision and his planned visit to Yasukuni Shrine.

　I am sure that once Japan, the world's largest creditor, transforms itself into an attractive market to investors both at home and abroad, its people will once again recover confidence.

The author, born in China, is an assistant manager of Norinchukin Research Institute Co.