Japanese investment in China is expected to maintain its momentum for the rest of the year, experts have predicted.
And they expect more investment will be channeled into the service industry and China's inland areas in the next few years.
A study by the Development Research Centre under the State Council estimates that over 40 percent of Japanese investment will flow into the service sector by 2005.
An estimated 40 percent will be in the commerce and finance sectors.
Experts say Japanese investors will also become more inclined to fund large-scale enterprises and set up wholly owned companies and research and development centers in China.
Until the end of last year, Japanese companies had invested US$32.4 billion in 22,386 projects in China, according to statistics from the Chinese Ministry of Foreign Trade and Economic Cooperation.
Japan is now the second largest foreign investor in China, only after the United States.
Much of the investment went into the manufacture sector -- into machinery and electronic products -- and centered around eastern coastal cities in the form of Sino-Japan joint ventures, said Xu Mei, a senior researcher with the Chinese Academy of Social Sciences.
She said Japanese investment has been a major source of capital for China's economic development and has played an important role in improving the Sino-Japan trade structure, introducing advanced Japanese technology, upgrading China's industrial structure and increasing employment opportunities in China.
Sino-Japan trade has been heavily promoted and has boosted Japan's exports of machinery, equipment and parts to China.
Xu expects Japanese investment in China will continue to grow.
A recent United Nations report ranked China as the hottest spot for foreign direct investment on the basis of its comparative advantage and huge market potential.
Surveys by the Japan Bank of International Cooperation and the Japanese Trade Promotion Association in recent years found that China is the favorite long-term investment place for Japanese firms.
But business disputes as a result of expanding economic cooperations threaten to disrupt trade between the two countries.
They include a dispute on three farm products in 2001 and the issue of pesticide residue on Chinese vegetables and fruits.
(China Daily September 30, 2002)