Japanese investment shift forecast

PUBLISHED : Tuesday, 15 August, 2006, 12:00am
UPDATED : Tuesday, 15 August, 2006, 12:00am

Japanese investment on the mainland rose 11.3 per cent year on year to US$3.3 billion in the first half of this year, providing one of the few bright spots for China as overall foreign direct investment slipped 0.5 per cent.

However, Japanese officials are hinting that the country's investment in China may be poised to shift to other markets.

The decrease in total foreign investment on the mainland was attributed to a peak in investing in manufacturing, increased investment costs and a less positive environment for foreign companies, the Japan External Trade Organisation (Jetro) said in a report released yesterday.

The report said leading investors retreated, with South Korean investment down 39.5 per cent to US$1.7 billion, the US falling 18.3 per cent to US$1.2 billion, and Taiwan falling 12.2 per cent to US$1 billion. Hong Kong remained the mainland's largest investor, primarily in real estate, with growth of 9.7 per cent to US$8.8 billion.

Yoichi Maie, deputy director of Jetro Beijing, hinted that Japanese investment in China might slow. He said companies were becoming more active overseas, but planned to diversify in order to hedge risks.

'The Sars outbreak in 2003, and the anti-Japanese demonstrations and boycott of Japanese products last year, forced Japanese concerns to come face to face with the risk of investing and doing business in China,' the Jetro report said. 'As a result, many companies have been re-examining their 'single-focus' approach to the China market.'

He said Japanese investment rose 585.4 per cent year on year in Brazil during the first half of the year, and rose 64 per cent in Russia.