China losing lustre for Japanese companies: survey

China has fallen off the top of a list of Japan Inc's favoured investment destinations for the first time in more than two decades because of higher labour costs and bilateral tensions, a survey said.

Indonesia took the top spot, up from third place on support from sectors ranging from automobiles to electronics, the Japan Bank for International Cooperation (JBIC) said.

China tumbled to fourth after 21 years of being named as the most promising destination for overseas expansion, the governmental bank said in its annual survey released Friday.

The bank asked companies already operating overseas to choose up to five promising nations and regions for their business in the next three years.

Of the nearly 500 companies that answered, 44.9 percent said Indonesia was a good place to do business while China saw its popularity dive to a lowest-ever 37.5 percent from 62.1 percent.

Among companies that dropped China from their list this year, more than four in 10 said rising labour costs and difficulty in hiring enough workers were a concern.

Other concerns cited were a slowdown in the Chinese economy, intensifying competition with rivals and bilateral political relations, with Japan and China embroiled in a bitter territorial dispute over islands in the East China Sea.

Tokyo's nationalisation of part of the chain last year triggered huge anti-Japanese demonstrations and boycotts of Japanese products in China.

The JBIC survey showed India maintained its second slot although it was cited by just 43.6 percent of firms, down from 56.4 percent, due partly to rising labour costs and poor infrastructure.

Thailand came third, up from fourth last year. The poll was taken before ongoing opposition demonstrations began in Thailand.

Nine of the top 20 slots were held by members of the Association of Southeast Asian Nations (ASEAN).

"Japanese companies have utilised ASEAN countries as production bases for a very long time. They now recognise these countries are very promising markets as well," said Shinji Ayuha at the JBIC research division.

"The ranking shows re-evaluation of ASEAN," he told public broadcaster NHK.

Others in the top 20 included Brazil, Mexico, Turkey and Russia.