Despite diplomatic relations sinking to a new low, figures from China’s Ministry of Commerce show that Japanese foreign direct investment (FDI) into China surged by 55.5 per cent year-on-year in the first three quarters of 2025.
Japan was not an exception. Swiss investment in China jumped 66.8 per cent, British investment rose 15.9 per cent, and the United Arab Emirates recorded 27.3 per cent growth, driven largely by its interest in green energy and the digital economy.
Japan is a member of the RCEP, the world’s largest free trade agreement (FTA), which enables member states to trade and invest more freely within its framework. Now, Japan is leveraging these benefits by investing heavily in high-end manufacturing and R&D within China, its largest trading partner.
Honda, for example, announced a deep partnership in 2025 with Momenta, a leading Chinese autonomous-driving company. Japanese automakers understand that in the age of electrification and intelligent vehicles, walking away from China’s R&D ecosystem risks global marginalisation.
Countries like the United Kingdom and Switzerland, both global offshore financial hubs, are emerging as indirect gateways for China to access Western capital and technology. Saudi Arabia, driven by its energy transition agenda, has also begun channelling capital into Chinese technology and new-energy sectors.
We are already seeing US companies investing in China’s pharmaceutical industry via Saudi Arabia. It is likely that by 2026, more Japanese firms, seeking to hedge against geopolitical risk, will invest in China through subsidiaries or joint ventures based in third countries. What matters here is not where the capital originates, but how it is legally and statistically classified.
As of 2025, China and Switzerland are negotiating an upgrade to their FTA, which officials say could expand cooperation into digital trade and AI. Given China's strategy of channelling foreign investment into specific industries, Switzerland may evolve into a "technology custody centre" in 2026.
Sanae Takaichi’s victory in Japan’s 2026 election presents Japanese voters with a new model of behaviour with a deliberate division of political and economic strategy. Politically and militarily, Japan confronts China with its toughest stance yet. Economically and technologically, however, Japanese firms continue to deepen their ties with China through joint funds and partnerships based in Saudi Arabia, Switzerland or the UK.
Makes sense. I wouldn't bet on America for anything going forward, so why would they miss out entirely on a new rising economic power? Now is especially the time to get as much as they can before relations sour