Economic and Political Factors for the Fall of Japanese Foreign Direct Investment in China

Japanese direct investment in China fell sharply in 2013 and 2014. Both political and economic factors contributed to the fall. Political tensions between the two countries greatly exacerbated China risks as perceived by Japanese companies and dampened their confidence of investing in China. Additionally, China has lost its competitiveness of attracting export-oriented Japanese FDI because of the cumulative appreciation of the Yuan and rapid wage growth.