Japan is divesting from China.

According to data released by the Japan External Trade Organization (JETRO), investment by Japanese companies in China decreased by 33% in 2013 compared to 2012, totaling only $9.09 billion in 2013.

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According to JETRO, Japanese companies invested $22.8 billion in Southeast Asian countries such as Vietnam, Singapore, Thailand, Indonesia, Malaysia, and the Philippines in 2013, significantly more than they invested in China, even though China is Japan's largest trading partner. It is also noteworthy that the increase in direct investment by Japanese businesses in Southeast Asia coincided with their continued withdrawal of investment capital from China.

Rising land costs and increasing labor costs in China are among the important reasons for the aforementioned developments in Japanese companies' direct investment in China and Southeast Asia. However, these are not the most decisive factors, as land and labor costs in Southeast Asian countries have not decreased and may even have increased compared to before. Furthermore, economic growth in China remains stable and promising.

Therefore, the decisive impetus for the aforementioned development can only be the political relationship between Japan and China and the countries in Southeast Asia. In this respect, contrasting trends are currently observed. While Japan's political relationship with China continues to be fraught with difficulties and escalating tensions, confrontation, and mistrust, Japan's relationship with ASEAN and the countries in Southeast Asia is being strongly promoted, becoming increasingly closer and more trustworthy than before.

Meanwhile, the Japanese government, particularly current Prime Minister Shinzo Abe, is strengthening political relations, economic and trade cooperation, and especially military and security ties with countries in Southeast Asia. In this region, Japan does not face the same old or new obstacles with countries as it does with China. In fact, Japan sees opportunities to build its regional political role and unite countries that share its need to address territorial disputes with China.

China's recent actions violating Vietnam's sovereignty and territorial integrity in the South China Sea have further reinforced the concerns of Japanese companies and prompted them to withdraw investment from China in favor of markets with more favorable and stable business environments. If China continues to provoke its neighbors, as it is currently doing with Vietnam, then the withdrawal of Japanese investment from China will certainly continue in the future. Creating favorable conditions to welcome this shift in Japanese investment will open up new business cooperation opportunities for businesses in Southeast Asia.

According to the Business Forum