Sort Of A Misleading Headline.....

"Fearful Japanese investors turning more to India"

The Standard article on Japanese firms focus on India due to....

Yuan concerns and anti-Japan sentiment have prompted Japan Inc to look more closely at India as an alternative.

In actuality, firms are looking to move facilities or open new ones in India due to all the positive attractions that India has due to India's comparative advantages.

In economics, the theory of comparative advantage explains why it can be beneficial for two countries to trade, even though one of them may be able to produce every kind of item more cheaply than the other. What matters is not the absolute cost of production, but rather the ratio between how easily the two countries can produce different kinds of things.

I suppose this also holds true for trade comparing two counties relative to a third party, in this case Japan.

But overall, importers of goods from China have to be concerned on several fronts with production in China. There are risks by relying too heavily on one country. China's threats to invade Taiwan risks major economic disruptions if these plans come to fruition. Trade could grind to a halt, or may be temporarily disrupted and other countries may get dragged into the conflict unwillingly if China threatens regional oil and natural gas supplies to the likes of Japan and Korea.

Also, as I have written about before, China may have trouble delivering the power necessary to run plants and factories uninterrupted. Energy uncertainty adds potential expenses and real risks.

The third major problem is that relative tax rates in China are amongst the highest in the world second to only France. At one point, adding marginal production to China may be curtained due to onerous tax burdens and blizzards of resulting paperwork and bribes.

Although the Japanese are scared doing business in a hostile China, the rest of world has some of the very same worries.