Three Asian partners reshape their ties

In 2013, China's total outward direct investment in Japan fell 23.5 percent, and Japan's investment in China decreased 4.28 percent, according to the Ministry of Commerce.

"Political tensions aside, the outlook for Japanese investment in China depends on the size of the Chinese market" for particular industries or companies, said Yao Haitian, a researcher at the Institute of Japanese Studies, which is under the Chinese Academy of Social Sciences.

Trade between the two countries is strongly driven by investment. Most of the Japanese companies investing in China mainly sell their goods to the Japanese market.

Japan has kept its key technologies at home and just shifted "fringe" technology or some management functions to China, said Yao.

"To my knowledge, most Japanese companies are planning to maintain their production in China, not expanding at the moment. However, companies in retailing and logistics, such as (fashion retailer) Uniqlo, desire to expand in China," said Yao.

Japan's exports to China in auto parts, metal machinery and electronic components declined in 2013, according to the Japan External Trade Organization.

JETRO noted that with the upgrading of consumption in China, many Japanese consumer goods are becoming more popular. Shipments of children's clothing and camping products to China, for example, more than doubled last year.

Experts said that political disputes between China and Japan are opening new doors for South Korea.

"For some products, such as electronics, vehicles and chemical products, which can be bought from South Korea, Chinese producers and consumers will make their own choices," said Zhang Xiaoji, director-general of foreign economic relations at the Development Research Center of the State Council.

"Japan and South Korea are competing in many areas. For example, as South Korea has made great improvements in LCD screens, I think Chinese consumers are considering giving up Japan-made sets," Zhang said.

Still, Yao said Japan has very advanced technology and does better than South Korea at mechanical products.

"Competition will be shaped by the two countries' competitiveness. This process will also help improve the core competitiveness of Chinese companies," said Yao.

That view is supported by a report from South Korea's Hyundai Economic Research Institute. The organization said that despite South Korea's increasing market share in China's auto parts industry, 63 percent of these producers are losing competitiveness in the market.

They have to invest more in research and development, and also take advantage of the China-South Korea FTA, said the report.

China's FDI up 10.44% in January-February	China's FDI rose 16.11% in January