This week’s issue of The Economist has a report on how (and why) Japanese investment into China is declining.
But the appeal of China as a manufacturing hub and a huge new market is not universally shared among Japanese businesses. Some companies are moving operations to other countries instead, and others are keeping business back home. Japanese companies poured $4.5 billion into China in 2006—a 30% drop from the $6.5 billion invested in 2005, according to China’s Ministry of Commerce.
Even for Japanese firms that are investing overseas, surveys show a shift away from China in favour of other Asian countries. In 2004 around 86% of Japanese firms planned to expand in China; last year the figure dropped to 77%, and 2% said they were actually scaling back their Chinese operations. In another survey, which asked Japanese firms to rate which countries they regarded as the best places to invest in the next three years, the proportion opting for China dropped from 91% in 2004 to 77% last year, while the appeal of Vietnam and India rose substantially (see chart). This is partly because China has become expensive compared with elsewhere in Asia. There is also concern over anti-Japanese sentiment. [The Economist]