TOKYO: Japan direct investment in China in 2014 dropped 38.8% from the previous year to US$4.33 billion, the Commerce Ministry said.
The plunge, which compares with a decline of about 4% in 2013, reflects soured bilateral relations over territorial and wartime historical issues, as well as rising labour costs in China.
In addition, analysts say, the depreciation of the Japanese yen is making it more difficult for Japanese companies to expand operations in China.
This is the biggest shrinkage since 1989, when Japan’s investment in China fell about 35% on year following the 1989 Tiananmen Square military crackdown, which had an immediate chilling effect on Beijing’s foreign relations, according to the Japan-China Economic Association.In 2014, China attracted a total of $119.56 billion in foreign investment, up 1.7% year-on-year, according to the ministry.WhileFDinflows, excluding those in the financial sector, jumped nearly 30% from both South Korea and Britain, the ministry said investment from the United States dropped 20.6% and that from the European Union decreased 5.3%.
Investment from the 10-member Association of Southeast Asian Nations, including Indonesia, Singapore and Thailand, fell 23.8%.
As wages and other necessary business costs in China have been rising each year, particularly in its coastal regions, analysts say, not only Japanese, but an increasing number of foreign companies are finding it less financially attractive to move production to the world’s second-largest economy.
