However, the chamber also called for equal treatment of Japanese companies in China.

The paper called for the development of rules for a market-oriented economy and adequate implementation, the loosening of excessive government regulations and equal treatment of domestic and foreign companies and application of global standards.

In the January-May period, overall nonfinancial foreign direct investment in China rose 2.8 percent to $48.91 billion. However, FDI from Japan slumped 42.2 percent, according to the Ministry of Commerce.

Nevertheless, Japan was still among the top five investors in China.

"Political tensions aside, the outlook for Japanese investment in China depends on the size of the Chinese market and also the competitiveness of Japanese companies," said Song Hong, an economist at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.

"To my knowledge, most Japanese companies are planning to maintain their production in China and are still betting on the huge Chinese market," said Song.

Still, Japanese companies, especially those in the vehicle and electronic sectors, are losing competitiveness in the global context.

Moreover, they are confronted with fierce competition as more foreign companies battle for market share and local companies gain strength.

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