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Wednesday 19 Dec 2018 | 05:46 | SYDNEY
Wednesday 19 Dec 2018 | 05:46 | SYDNEY

Japanese FDI: Asia + China



15 February 2013 14:19

My previous post on the cooling economic relations between Japan and China sent me to look at statistics on Japanese FDI outflows to Asia to see if there was any noticeable decline in outflows to China yet. The answer is 'no'. Japanese outflows to China as a share of total outflows to Asia stayed relatively stable (between 28-33%) from 2007-11 with an uptick in 2012 to 40%.

A closer look shows that the conventional wisdom that Japanese firms, when it comes to FDI outflows, are in a 'China-1' situation (the perceived phenomenon that foreign firms have concentrated too much of their FDI and production networks in China and that, to diversify risk, they are looking to a '-1' country in Southeast Asia) is not accurate. Except for the years of 2003-4, where China's share of Japanese FDI in Asia was well over half, China's share has remained quite stable.

In the last decade, the biggest move is the rise of Vietnam and India as FDI destinations and the continued strength of Southeast Asia as a destination. In 2008, India and Vietnam attracted more Japanese FDI than China. In 2011, Indonesia, the Philippines, Thailand and Malaysia together attracted more Japanese FDI than China despite being collectively much smaller in GDP and population terms.

So although there is growing Japanese FDI in the rest of Asia, this hasn't come at the expense of China. It is better to think of Japanese FDI as an 'Asia-China' story, with the boundaries of Asia shifting westwards.

Photo by Flickr user BilabialBoxing.

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