Here is an interesting
article concerning how geopolitical concerns affect foreign direct investment (FDI). Despite China being one of if not the largest recipient of Japanese FDI in past years, rising security concerns have made Japan rethink where it places its money. In a non-democratic society, it would be so easy to expropriate Japan-owned businesses if PRC leadership felt like it. This concern has been a recurrent one, especially after the
2012 riots in China against Japanese-owned businesses. Indeed, it's in the aftermath of the 2012 riots when the Japanese have actually begun putting there money where their mouths are at: anywhere but China:
Japanese investment in Southeast Asia continues to grow, owing to the region’s potential and low labor costs, amid simmering tensions that reduce the appeal of China for some Japanese businesses. For a third straight year, in 2015 the amount of foreign direct investment from Japan to the 10-member Association of Southeast Asian Nations exceeded such investment in China and Hong Kong, according to figures compiled by the Japan External Trade Organization.
The pace has been accelerating -- the outstanding amount of Japanese investment to Asean nations almost tripled from five years ago to 20.1 trillion yen ($180.9 billion) at the end of last year, according to Bank of Japan data.
Make no mistake: territorial disputes do factor into the collective decisions of Japanese investors:
Japanese investment growth to China slowed after protests there intensified in 2012 following a territorial dispute over islands in the East China Sea, prompting Japanese companies to diversify investment risks. With Japan’s economic growth anemic and the nation’s population aging and declining, companies have been searching for growth opportunities elsewhere in Asia.
“Asean markets are attractive from the Japanese perspective,”’ said Ma Tieying, an economist at DBS Group Holdings in Singapore. “Many economies have great potential to grow, thanks to relatively low per-capita incomes and a young population profile.” The openness of markets in the region along with labor costs that are lower than in China also is attracting Japanese investment, he said.
Japan is moribund, while China is becoming a gig question mark for continued investment What's left? Southeast Asia, despite its flaws, looks inviting.
