Fall in Japanese investment 'set to continue'

Japanese companies will keep scaling back investment in China due to a poorer economic outlook, but the improved political climate between the countries will help to prop up investment activities, Japanese trade officials said on Wednesday.

"The prospect this year remains gloomy in terms of the number of Japanese investment projects in China, which is unlikely to rebound to the previous high level," said Yoshihisa Tabata, director-general of the Beijing office of the Japan External Trade Organization.

Tabata was speaking at a news conference held by the Japanese Chamber of Commerce and Industry in China to mark the release of its annual white paper on Japanese enterprises operating in China.

According to the paper, 46.5 percent of Japanese companies intend to expand their operations in China in the next two years, compared with 66.8 percent in 2011. It cited a survey conducted by the Japanese organization in October and November.

The white paper, first published in 2010, analyzes critical issues facing Japanese companies in various sectors and regions in China.

In the first four months of this year, Japanese investment in China stood at $1.44 billion, a year-on-year fall of 7.8 percent, according to the Chinese Ministry of Commerce.

The trend is likely to continue this year due to the slower Chinese economy, rising labor costs and depreciation of the yen, according to analysts.

Last year, the value of Japanese investment in China contracted by nearly 40 percent to $4.3 billion.

But Kazuaki Tanaka, chairman of the Japanese chamber in China, said economic activities will benefit from improved bilateral political relations.

This was demonstrated by the recent meeting between President Xi Jinping and Japanese Prime Minister Shinzo Abe and the visit to China last month by a 3,000-member Japanese delegation.

Tanaka said Japan wants to sign the China-Japan-South Korea Free Trade Agreement as soon as possible.

China remains a key market with vast potential for Japanese companies focusing on Chinese consumer markets, although the country's appeal is declining for export-oriented Japanese enterprises, Tabata added.

Wang Zhile, a researcher at the Chinese Academy of International Trade and Economic Cooperation, said declining Japanese investment reflects the overall trend of foreign direct investment in China, which has entered a period of slower growth.

Wang said the value of Japanese investment in Southeast Asian countries is double the value of such investment in China, which should serve as an alarm for China's top policymakers.