Japan’s China investment drops 60% in 10 years as firms rethink strategies

Geopolitical considerations and intense competition from domestic firms have led Japanese companies to move their China investments elsewhere

Reading Time:2 minutes

Japanese firms have been on edge when it comes to their China investments in recent years. Photo: AFP

Published: 11:55am, 14 Feb 2025

Japan’s investment in China has plummeted by 60 per cent over the past decade, a casualty of escalating tensions between China and the United States as well as Beijing’s growing competitiveness in sectors once dominated by Japan.

However, a raft of stimulus policies employed by Beijing last year appears to have borne some fruit in rebuilding confidence, according to a Wednesday report from the China-Japan Chamber of Commerce, with some Japanese firms improving their outlook in a survey.

Japan’s investment in China in 2024 amounted to 493.1 billion yen (US$3.2 billion), almost identical to the previous year’s number and a nearly 60 per cent drop from the figure 10 years prior, according to data from the Ministry of Finance in Tokyo.

Beijing counts Japan as a major source of foreign investment. But a slowdown in China’s economy, compounded by a prolonged slump in its real estate sector, has driven away foreign capital. Investor confidence also waned after a series of regulatory escalations against the private sector.

And with the US-China relationship worsening, US treaty ally Japan has begun to re-examine its own increasingly strained ties with its neighbour.

However, according to the chamber of commerce’s report, optimism is on the rise among Japanese companies following a series of stimulus policies from the Chinese government rolled out starting last September.