Amid the political tensions, Chinese FDI in Japan is quietly growing. In less than a decade, China has become one of the world's most important investing countries. Indeed, China's outward FDI could well exceed its inward FDI this year for the first time ever, according to the United Nations Conference on Trade and Development.

The first waves of Chinese FDI in the early 2000s went mostly to mining activities in Australia, Canada, Africa and Latin America, according to the Asia Society, a non-profit organisation designed to build awareness of Asia. But, over the past five years, Chinese capital has been targeting technology and innovation-intensive industries, as the country seeks to climb further up the global value chain.  

According to the Japan External Trade Organisation (Jetro): "There has been increased investment from Chinese firms that recognise the value of the technologies, brands and expertise held by Japanese firms and are aiming to obtain these business resources."

Flurry of activity

Chinese investment in Japan, virtually non-existent until five years ago, now stands at close to $600m, based on Jetro data. In 2010, there was a sudden increase in transactions, with the number of Japanese firms purchased by Chinese companies jumping by 42% to a record of 37, topping the number purchased by US firms (35) for the first time.

Deals have been wide-ranging in scope. For example, in January 2011, Chinese multinational computer technology company Lenovo formed a joint personal computer venture with Japanese IT company NEC. Meanwhile, Japan's JX Nippon Oil and Energy and Chinese oil and gas company PetroChina agreed to set up a joint venture to run the Japanese firm's Osaka refinery. In other moves, Chinese white goods manufacturer Haier acquired Japanese electronics company Sanyo and Chinese retailer Suning Appliance took over Japanese electronics retailer Laox. 

There have also been cases of Chinese companies making Japanese acquisitions with an eye on expansion in China. Chinese investors bought the Japan-owned Honma Golf due to the rising popularity of golf in China. A Chinese investment firm now has the largest stake in Hokkoku Co, operator of the Dosanko ramen noodle restaurant chain. And, with Chinese tourists to Japan growing rapidly in number, Chinese investors purchased the 'Hana no Yakata Somei Inn' in the Atami hot spring region.

A groundswell

There are also reports of Chinese sovereign investment funds using third-party investors to gain stakes in blue-chip Japanese companies such as car manufacturers Toyota and Honda, and electronics conglomerates Canon and Hitachi. This is an effective way of tapping into the growth of these global companies while remaining under the radar.

It is politics rather than economics that is the main factor that could limit further growth in this encouraging, though modest, investment relationship. Fortunately, there are signs that the general mood of the Chinese population towards Japan may be improving, according to Tokyo-based communications consultant Jochen Legewie. 

“Many Chinese [tourists] are quoted to be deeply impressed by Japan and the Japanese [when they are surveyed after visiting] the country for the first time”, he says. The number of Chinese tourists visiting Japan has been growing rapidly this year.  

And, at the time of writing, joint initiatives are under way to repair the damage to business relations that stemmed from recent political tensions.

The 10th Japan-China public opinion poll by Japan-based think tank Genron, published in September 2014, reported that more than 60% of Chinese respondents agreed that "economic relations between the two countries complement one another, thus a win-win relationship can be constructed", suggesting that public opinion is already changing.