John Garnaut, Tokyo
The Age (Australia)
MULTINATIONAL corporations are diversifying their new investments away from "the world's factory", China, in response to rapidly rising labour costs, shaky legal protections and fear of anti-Japanese sentiment.
While China remains by far the favourite direct-investment destination, India, Vietnam and other South-East Asian countries are gaining ground.
Foreign direct investment from the European Union into China fell 29.4% last year, Japanese investment fell 24.6% and US investment fell 12.8%, according to the website of the Department for Foreign Investment Administration, part of China's Ministry of Commerce.
The shift partly reflects Chinese Government policy, which now seeks strategic investors rather than just capital, but also reflects rising concerns among foreign governments and CEOs.
Atsuo Kuroda, who heads the China division of Japan's Ministry of Economy, Trade and Industry, told BusinessDay that China's advantage over southern and South-East Asia was being eroded by rapidly rising wages, a tough new labour law and legal problems involving intellectual property and arbitrary local government decisions.
"For high-tech industries it's a risk investing in China because partner companies can easily steal their technology and set up a factory next door," Mr Kuroda said. Nobuhiko Sasaki, who heads the ministry's South-East Asia division, said Japanese companies had been setting up factories in places such as Vietnam, India and Cambodia since anti-Japanese tensions boiled over in 2005.
"The anti-Japanese movement gave an impression that China may not be a long-lasting, reliable investment destination," he said.
China's Ministry of Commerce says foreign direct investment rose 13.6% to $US74.7 billion ($A84.1 billion) last year, but that figure appears to be grossly inflated by mainland Chinese money being routed through offshore tax havens to exploit generous tax incentives for foreign investors.
Figures from the DFIA show investments channelled through the British Virgin Islands, Cayman Islands, Mauritius and Samoa surged 37% to account for more than a quarter of all foreign direct investment last year. The British Virgin Islands alone accounted for $US16.6 billion. Investments through Hong Kong surged 37% to $US27.7 billion.
"If you add Hong Kong, then almost two-thirds is from tax havens," Mr Kuroda said. "This is all Chinese people."
These round-robin investments expose a gaping money-laundering hole in China's cross-border financial controls. But such investments are expected to drop away this year because China recently removed tax and other foreign investor privileges.
Japanese companies poured 25% more direct investment capital into countries of the Association of South-East Asian Nations than China in the first half of last year, Japanese officials say.
"This is the turning point," Mr Sasaki said.
A survey last year by the Japan External Trade Organisation showed Japanese companies were more worried by intellectual property theft, tax risks and problems with legal systems in China than any other country. It showed nine companies shifting factories in China to Vietnam and two companies shifting to Thailand. But the organisation's president, Tadashi Izawa, said China's many problems were still outweighed by its benefits. "The Chinese are very good at manufacturing everything. And the opportunities are too great to ignore.," he said.
Japanese companies are reducing their cheap labour, export-focused manufacturing in China but building factories with more advanced technology there to serve the country's growing middle class.
Japanese companies poured 25% more direct investment capital into countries of the Association of South-East Asian Nations than China in the first half of last year, Japanese officials say.
"This is the turning point," Mr Sasaki said.
A survey last year by the Japan External Trade Organisation showed Japanese companies were more worried by intellectual property theft, tax risks and problems with legal systems in China than any other country. It showed nine companies shifting factories in China to Vietnam and two companies shifting to Thailand. But the organisation's president, Tadashi Izawa, said China's many problems were still outweighed by its benefits. "The Chinese are very good at manufacturing everything. And the opportunities are too great to ignore.," he said.
Japanese companies are reducing their cheap labour, export-focused manufacturing in China but building factories with more advanced technology there to serve the country's growing middle class.
While China remains by far the favourite direct-investment destination, India, Vietnam and other South-East Asian countries are gaining ground.
Foreign direct investment from the European Union into China fell 29.4% last year, Japanese investment fell 24.6% and US investment fell 12.8%, according to the website of the Department for Foreign Investment Administration, part of China's Ministry of Commerce.
The shift partly reflects Chinese Government policy, which now seeks strategic investors rather than just capital, but also reflects rising concerns among foreign governments and CEOs.
Atsuo Kuroda, who heads the China division of Japan's Ministry of Economy, Trade and Industry, told BusinessDay that China's advantage over southern and South-East Asia was being eroded by rapidly rising wages, a tough new labour law and legal problems involving intellectual property and arbitrary local government decisions.
"For high-tech industries it's a risk investing in China because partner companies can easily steal their technology and set up a factory next door," Mr Kuroda said. Nobuhiko Sasaki, who heads the ministry's South-East Asia division, said Japanese companies had been setting up factories in places such as Vietnam, India and Cambodia since anti-Japanese tensions boiled over in 2005.
"The anti-Japanese movement gave an impression that China may not be a long-lasting, reliable investment destination," he said.
China's Ministry of Commerce says foreign direct investment rose 13.6% to $US74.7 billion ($A84.1 billion) last year, but that figure appears to be grossly inflated by mainland Chinese money being routed through offshore tax havens to exploit generous tax incentives for foreign investors.
Figures from the DFIA show investments channelled through the British Virgin Islands, Cayman Islands, Mauritius and Samoa surged 37% to account for more than a quarter of all foreign direct investment last year. The British Virgin Islands alone accounted for $US16.6 billion. Investments through Hong Kong surged 37% to $US27.7 billion.
"If you add Hong Kong, then almost two-thirds is from tax havens," Mr Kuroda said. "This is all Chinese people."
These round-robin investments expose a gaping money-laundering hole in China's cross-border financial controls. But such investments are expected to drop away this year because China recently removed tax and other foreign investor privileges.
Japanese companies poured 25% more direct investment capital into countries of the Association of South-East Asian Nations than China in the first half of last year, Japanese officials say.
"This is the turning point," Mr Sasaki said.
A survey last year by the Japan External Trade Organisation showed Japanese companies were more worried by intellectual property theft, tax risks and problems with legal systems in China than any other country. It showed nine companies shifting factories in China to Vietnam and two companies shifting to Thailand. But the organisation's president, Tadashi Izawa, said China's many problems were still outweighed by its benefits. "The Chinese are very good at manufacturing everything. And the opportunities are too great to ignore.," he said.
Japanese companies are reducing their cheap labour, export-focused manufacturing in China but building factories with more advanced technology there to serve the country's growing middle class.
Japanese companies poured 25% more direct investment capital into countries of the Association of South-East Asian Nations than China in the first half of last year, Japanese officials say.
"This is the turning point," Mr Sasaki said.
A survey last year by the Japan External Trade Organisation showed Japanese companies were more worried by intellectual property theft, tax risks and problems with legal systems in China than any other country. It showed nine companies shifting factories in China to Vietnam and two companies shifting to Thailand. But the organisation's president, Tadashi Izawa, said China's many problems were still outweighed by its benefits. "The Chinese are very good at manufacturing everything. And the opportunities are too great to ignore.," he said.
Japanese companies are reducing their cheap labour, export-focused manufacturing in China but building factories with more advanced technology there to serve the country's growing middle class.
3 comments:
Cambodia is still ignored by Japanese businesses!
We need to set up vocational training in different sectors in different part of provinces and those sectors are: Energy, Automotive, Electronics, and Technologies in general.
Manufacturers are looking for skilled labor with some training back ground. Until these are being addressed in the government, we will not get any direct manufacturing investments from Automotive, Electronics, and Tecnological (computers)....
No investors will come if we don't have enough security from workers who always want demonstration. Business has its deadline to delivery goods if we don't set up a good policy on demonstration, WE WILL LOSE.
I don't like any polital party to involve in this.
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