China still top spot for Japanese companies

A Uniqlo store in Nantong, Jiangsu province. The Japanese casual wear designer, manufacturer and retailer is planning to open more stores in China, at a time when many Japanese companies still consider China to be their top investment destination. [China Daily]

China will remain the top destination for Japanese investment over the next five years, although Japan's capital inflow to the country may slow down and India is growing fast as another attractive option, according to a survey by the Japan External Trade Organization.

JETRO Beijing Deputy Director-General Dai Hakozaki said: "China is still the most suitable place for Japanese companies to invest in the coming five years."

A poll on Japanese companies' foreign investment orientation over the next three to five years was conducted by JETRO earlier this year.

Of the more than 1,000 Japanese companies surveyed, 62.1 percent chose China as the first place they would invest within the next five years, 10.7 percentage points lower than in 2011.

India has been developing into an alternative and is the second most attractive overseas investment destination for Japanese companies, Hakozaki said.

India was favored by 56.4 percent of respondents, down from 58.4 percent in the previous year.

"Low labor costs in other developing economies including India and Vietnam have increased their competitiveness as investment markets for Japanese companies," said Yao Haitian, a researcher at the Institute of Japanese Studies at the Chinese Academy of Social Sciences.

"It's still difficult to estimate whether India will overtake China as the biggest overseas investment destination for Japanese investors," Hakozaki said.

According to the survey, Japanese enterprises with a shorter presence in China have a stronger willingness to increase investment in the market.

Some large-scale investment projects have been launched by Japanese companies in several Chinese cities in the first three months of the year.

Sumitomo Group, one of the largest Japanese conglomerates, invested 3 billion yuan ($482.7 million) to jointly expand real estate business with Hong Kong Yida Group in Dalian, Liaoning province.

Japanese food manufacturer, Ajinomoto Group Corp, is planning to spend $13.6 million to expand its production line in Shanghai.

As the first step toward gaining a foothold in the Chinese market, Meiko Trading Co Ltd invested $6 million to establish electronic equipment leasing shops in China, the first of which will be opened in Hong Kong.

"Being optimistic about economic growth in China, Japanese companies will continue to invest in the Chinese market," said Jiang Yuechun, director of the Department for World Economy and Development at the China Institute of International Studies.

"More capital from Japanese companies may flow into the retail and service industries in which business could be developed very well without enormous spending on technology," said Yao from the CASS.

Fueled by huge demand in China, Japanese casual wear designer, manufacturer and retailer Uniqlo is planning to open more stores in China.

Japanese investment in China declined 6.7 percent year-on-year to $1.27 billion in the first two months, but its investment in China in March surged 43.2 percent to $1.02 billion, according to the Ministry of Commerce.

Chinese enterprises are trying hard to promote competitiveness, including technical skills and brand image, in which they are weaker than their Japanese counterparts.

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