Japan’s Direct Investment in China Drops 38.8%

Japan’s direct investment in China in 2014 dropped 38.8 percent from the previous year to $4.33 billion, the Commerce Ministry said Thursday.

The plunge, which compares with a decline of about 4 percent in 2013, reflects soured bilateral relations over territorial and wartime historical issues, as well as rising labor 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 percent 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 percent year-on-year, according to the ministry.

While FDI inflows, excluding those in the financial sector, jumped nearly 30 percent from both South Korea and Britain, the ministry said investment from the United States dropped 20.6 percent and that from the European Union decreased 5.3 percent.

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza