By Dezan Shira<\/p>\n
A recent report surveying 605 Japanese manufacturing companies shows that India has overtaken China as the most attractive investment destination in the next 10 years.<\/p>\n
Japan Bank for International Cooperation (JBIC) released the newest edition of its annual “Survey Report on Business Overseas Operations by Japanese Manufacturing Companies” on December 3. In the section for business prospect research, the survey gives special attention to the emerging markets.<\/p>\n
Survey participants were asked to name the five most promising markets for business operation in the long term (10 years and above) – 74.9 percent of them chose India and 71.7 percent chose China. However, China still seems to be the most attractive market in the medium term (next three years or so), with 77.3 percent of people selecting it compared to India at 60.5 percent.<\/p>\n
China has consistently topped the JBIC survey’s list of promising markets in the medium-term during the past few years. In fact, the top four countries on the list – China, India, Vietnam and Thailand – did not change at all this year.<\/p>\n
However, the trend that India may take over China in the future is rising. Not only does India top the list in the long-term market survey, it also beat China in some specific industries as the most promising market. China received the most votes from a majority of industries in Japan, but 23.9 percent of automobile manufacturers regarded India as the best destination for their investment while 21.6 percent chose China. This has been the second consecutive year when India becomes the favorite of Japanese automobile investors.<\/p>\n
The future growth potentials of local markets in China, India and Vietnam have become the key factor influencing investors’ selections. Compared to the fact that China’s rising labor cost is starting to become the top issue that keeps investors away, inexpensive labor sources are quickly becoming major advantages attracting Japanese manufacturers to India and Vietnam. Roughly 44 percent of survey participants say investors favor India’s low-cost labor force while 61.2 percent of the votes were given to Vietnam for the same reason.<\/p>\n
Other complaints towards the Chinese market include the country’s unclear legal system, increasingly fierce competition from other companies, insufficient protection for intellectual property rights, and labor problems.<\/p>\n
The recent Sino-Japanese political conflicts also seem to be a growing concern for Japanese investors. A special survey the JBIC launched in September 2010 asked investors their opinions on the impact of the Senkaku Islands incident. Around 22 percent of respondents believe the incident has affected them substantially or in some way and 24.8 percent have lowered their assessment on China as a promising market.<\/p>\n
This article was written for 2point6billion, a source of Asia business news and analysis<\/a>, which was founded by Chris Devonshire-Ellis<\/a>.<\/p>\n