Against a backdrop of tensions in Japan-China relations and China's economic stagnation, Japanese companies are scaling back and withdrawing their operations in China, while moves to reduce reliance on the country are gathering pace.
Against a backdrop of worsening Japan-China relations, Japanese companies are increasingly reassessing their dependence on the Chinese market. According to a survey by Teikoku Databank, the number of Japanese companies operating in China stood at 10,118 as of June 2026, a substantial decrease from the previous survey. This also represents a substantial decrease from the record high in 2012.
Withdrawals and downsizing are particularly evident in the automotive industry. Mitsubishi Motors ended engine production in China and withdrew, while Honda closed its plant in Guangdong Province and suspended operations at its plant in Hubei Province. In addition, Isetan has closed stores in Shanghai and elsewhere. Some observers say these moves reflect government regulations, intensifying competition in the Chinese market, and stronger technological capabilities and price competition among local companies.
Japanese companies are reorganizing their production and sales operations in China and reducing their reliance on the country, but they still cannot afford to abandon demand in the Chinese market. As the need to rebuild supply chains grows, some companies are undertaking strategic reviews for the long term, including considering sales to local companies and consolidating production sites. Hideki Morioka (森岡 英樹) says China's economic stagnation and slowing economic growth are also factors behind the withdrawals and downsizing. The second part will examine dependence on China in the electronic components and semiconductor sectors and the medium- to long-term impact of China risk.