A record 4,137 Japanese companies have completely left China over the past two years. At the same time, only 1,221 new Japanese entities — a subsidiary, plant, or representative office — appeared in the country. This is the lowest figure outside the COVID-19 pandemic period, CNBC reports, citing Teikoku data.
Martin Schulz, chief policy economist at the Fujitsu Research Institute, linked Japanese businesses’ departure from China to several factors: U.S. tariffs, growing public resistance to Chinese goods, and the development of the Indian market. In his assessment, investments in China have faced a combination of unfavorable circumstances.
Jesper Koll, expert director at Monex Group, noted that Japanese companies are increasingly relying on the U.S. market while reducing their dependence on China. According to his calculations, the share of profits earned in China by companies included in the Topix index fell to less than 15% this year, compared with 23% in 2020. The share of profits from the United States, by contrast, rose to 35% from 25%.
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Analysts also link business sentiment to concerns over personnel safety in China. This year, Beijing detained Japanese citizens. According to reports, several Japanese nationals, including executives of major Japanese companies, were detained in August on suspicion of violating restrictions on exports of dual-use goods.
Jeremy Chan, an analyst at Eurasia Group, said Japanese companies and their employees increasingly feel unwelcome and unsafe in China. An April report by the Japan External Trade Organization also showed that companies are increasingly reluctant to expand their business in China.
The day after the Teikoku report was released, Chinese Vice Premier He Lifeng said that the country always welcomes Japanese enterprises seeking to develop business there and benefit from the opportunities of the Chinese market. Automakers, parts suppliers, and export-oriented manufacturers are the most likely to reduce their presence in China, said Kei Koga, a professor at Nanyang Technological University. In his view, localized companies capable of competing with Chinese manufacturers, including in medical and precision equipment, have a better chance of remaining.
Source: UA
