Japan set to boost China investment (2)

08:36, June 16, 2011      

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Japan is facing its worst crisis since World War II after the March 11 earthquake, ensuing tsunami and the radiation leak at Fukushima. Economists expect Japan's GDP will shrink for a third straight quarter in April-June before recovering in the second half of the year.

An aging population, declining consumption and pessimism among companies are adding to Japan's economic woes.

"It is highly possible that Japanese companies will move production lines to China," said Zhou Shijian, a senior trade expert at Tsinghua University.

In a recent exclusive interview with China Daily, Dai Hakozaki, deputy director of the Japan External Trade Organization Beijing, said China is likely to witness a new wave of Japanese companies transferring production lines. Regions hit by the quake and tsunami were major manufacturing areas and provided vital parts for the auto and electronics industry.

As a result, Japanese manufacturers in China have suffered due to the loss of these components.

China is the largest export destination for Japanese goods, but imports from Japan grew by only 4 percent in April and 7.7 percent in May because of the quake.

Japan's auto and mechanical equipment industries are the two main sectors that have invested in China, accounting for a combined 32 percent of Japan's investment in the country from January to September last year.

But some analysts voiced caution.

"We could see a transferring (of production lines from Japan), but it will not happen overnight," Wang Luo, an Asian studies specialist at the Chinese Academy of International Trade and Economic Cooperation, said.

"In years to come, China could be the best spot in Asia for Japanese companies."

Investment opportunities in the country have attracted a large and growing number of international brands.

German chemical giant BASF announced plans on Wednesday to invest 40 million euros ($57 million) in its Shanghai production center to double production capacity.

Italian luxury company Prada plans to add 12 stores a year over the next three years to its existing 18 stores.

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