According to the latest survey by Teikoku Databank, the number of Japanese companies expanding into China is reportedly about 30% lower than at the 2012 peak, reaching its lowest level on record. However, companies have not completely withdrawn, and efforts to diversify production bases and restructure business portfolios are reportedly progressing.
According to the latest survey by Teikoku Databank, the number of Japanese companies expanding into China is reportedly about 30% lower than at the 2012 peak and is now at its lowest level on record. Multiple factors have been cited for the decline, including the slowdown in the Chinese economy, intensifying competition from local companies, US-China tensions and instability in Japan-China relations.
However, the size of the local market and the concentration of manufacturing and parts suppliers remain strong, and many companies are reportedly not rushing to withdraw from China. Few companies are completely closing their local entities. Instead, the mainstream approach is reportedly to restructure portfolios by right-sizing operations and diversifying production bases into Southeast Asia and India.
The 5 risks to watch going forward are reportedly geopolitical risk, supply chain disruption, changes in the competitive environment at home and abroad, the predictability of laws and regulations, and the impact of worsening Japan-China relations. In light of these risks, a strategy of restructuring toward “China Plus One” without completely withdrawing from China is reportedly attracting attention.
Companies are reportedly expected to pursue survival strategies that balance economic rationality and national security by maintaining the value of the Chinese market while strengthening diversification into India and Southeast Asia. Some have also pointed out that management will need to evaluate geopolitical, regulatory, supply chain and technology competition risks in an integrated manner.