direct investment in China dropped 25.1 percent year-on-year in the
first 10 months this year, after declining 38.8 percent in 2014 on a
yearly basis, the Ministry of Commerce (MOFCOM) said on Tuesday.
Over the last two years, Japan’s direct investment in China has been
on a downward trend, partly because of the external economic environment
and also problems at Japanese enterprises, Shen Danyang, spokesman for
MOFCOM said at a regular press conference on Tuesday.
The depreciation of the Japanese yen has made it more difficult for
Japanese enterprises to expand their business in China, Shen said at the
Jin Baisong, a research fellow at the Chinese Academy of International
Trade and Economic Cooperation, agreed with Shen. "The depreciation of
the yen and appreciation of the yuan has made it costlier for Japanese
companies to run their businesses in China," Jin told the Global Times
This means that export-oriented Japanese companies are now less
competitive in the Chinese market, Jin said.
Some Japanese companies have also adopted a wait-and-see attitude
toward the Chinese market as they have some concerns over economic
development in China, Shen said.
China’s economy has entered a "new normal" period with slower economic
growth, and labor and land use costs are still rising, Shen noted.
Japan has a long history of investing in China, and many Japanese
companies set up branches in China years ago, but they are now facing
intensified competition from domestic companies as well as firms from
other countries, Shen noted, adding that some Japanese companies with
lower technology have been forced out of the Chinese market.
The sharp drop in Japanese direct investment in China also partly
reflects soured bilateral relations over territorial and wartime
historical issues, Jin said, and this could continue to be "one of the
factors limiting Japanese direct investment in China."
However, a reduction in some countries’ direct investment in China is
"a normal phenomenon" and simply a strategic adjustment when faced with
rising costs, Chen Fengying, a research fellow with the China Institutes
of Contemporary International Relations, told the Global Times on
"In the past, China gave some privileges such as tax breaks to foreign
companies in order to attract their investment. But now, China is
starting to treat domestic and foreign companies equally," Chen said.
Direct investment in China from the US also declined during the first
10 months, with a drop of 13.6 percent year-on-year, according to a
statement released by MOFCOM on November 11.
However, investment from ASEAN, the European Union, and from countries
and regions along the "Belt and Road" initiative continued to grow,
Chen also noted that Japanese companies will not give up on the
Chinese market, adding that foreign investment in the domestic services
and high-tech manufacturing sectors is growing strongly.
In the first 10 months, foreign investment in the domestic services
sector increased 19.4 percent, and in the high-tech services sector it
rose by 57.5 percent to $6.76 billion, according to MOFCOM