BEIJING – Japan’s direct investment in China dropped nearly 50 percent in January-June from the same period last year to $2.4 billion, China’s Commerce Ministry said Tuesday.
That is less than South Korea’s direct investment in China.
Observers attributed the sharp decrease to Japanese businesses’ skittishness over rising labor costs and strained relations between the two countries.
All told, direct investment in China for the first half of 2014 was $63.33 billion, up 2.2 percent. South Korea accounted for $2.8 billion, up 45.6 percent.
Only last year, Japan’s investment in China was $7.064 billion, more than double South Korea’s $3.059 billion.
South Korea’s China-bound investment is expected to increase further as the two countries are hoping to conclude a free trade agreement by the end of the year.
An executive from a group of Japanese companies operating in China offered a bleak outlook for Japan’s investment in China. “Given that investment contracts have decreased, (the value of) investment is expected to continue falling for the time being,” the executive said.