The Financial Times' report that Japanese companies are accelerating their withdrawal from China has drawn attention. Based on the latest statistics from Teikoku Databank and expert analysis, this article examines the current situation and future trends.
Against the backdrop of deteriorating Japan-China relations, the number of Japanese companies operating in mainland China stood at 11,118 as of June 2026, a new record low. This represents a decline of approximately 22% from the 2024 survey and approximately 30% from the peak in 2012.
Corporate restructuring is showing a shift from an expansion phase to a restructuring phase, driven by rising risks associated with manufacturing investment in China and intensifying competition from local companies and in the domestic market. The trend of Japanese companies withdrawing from China is expected to continue.
Companies explain that the primary objective of the withdrawals is not a complete break with China, but rather to reduce dependence on China by diversifying their supply chains. Nagao Satoshi (長尾賢), a fellow at the Hudson Institute, analyses the shift in Japanese companies' investment focus toward Southeast Asia and India.
Nagao Satoshi (長尾賢) observes that “the dragon Japan had been feeding has begun breathing fire.” Deteriorating Japan-China relations, against the backdrop of diplomatic tensions between the two countries, are prompting Japanese companies to reassess their businesses in China.