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 labour 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 official figures from the Chinese ministry. China is known to exaggerate figures.
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.
Investment from the 10-member Association of Southeast Asian Nations, including Indonesia, Singapore and Thailand, fell 23.8 percent.
As wages and other necessary business costs in China have been rising each year, particularly in its coastal regions, analysts say, not only Japanese, but an increasing number of foreign companies are finding it less financially attractive to move production to the world’s second-largest economy.
- China says Japan’s ‘hype’ on air defence zone spreads tension (chinadailymail.com)
- China rebuffs U.S. efforts on South China Sea tensions (chinadailymail.com)
- Philippines to propose no action to raise tension with China in sea disputes (chinadailymail.com)
- China seeks to be centre of Asian Union, world’s largest Free Trade Zone (chinadailymail.com)
- Chinese media says “Vietnam doomed to lose” (chinadailymail.com)
- China exports rose 6.1% in 2014 (thebricspost.com)