As relations between Japan and China come under increasing strain, the number of Japanese companies operating in China is trending downward. This article examines the background to Japanese companies’ shift away from China in light of the Xi Jinping administration’s changing stance toward Japan and key economic indicators.
As relations between Japan and China come under increasing strain, the number of Japanese companies operating in China is trending downward. According to a survey by Teikoku Databank, 10,118 Japanese companies were operating in China as of June 2026, 29.7% below the record high of 14,394 in 2012. Companies are shrinking and restructuring their China operations because of geopolitical risks and policy uncertainty.
At the same time, despite the deterioration in Japan-China relations, the Chinese side has expressed its desire for Japanese companies to continue doing business in China. Following director-general-level talks between the Japanese and Chinese foreign ministries, reports indicated that there were moves to meet with Japanese business leaders.
On the economic front, China’s slowing growth has come under scrutiny. The average growth rate under the Xi Jinping administration from 2013 to 2025 was 5.9%, relatively low compared with other administrations since the start of reform and opening, while real GDP growth for January-September 2026 was 4.6% year on year. Against this backdrop, views have emerged that the risks and uncertainty surrounding Japanese companies’ China operations are increasing.
Under these circumstances, Japanese companies are accelerating their shift away from China, while some argue that Japan and China should pursue necessary cooperation while maintaining an appropriate distance, balancing tensions and cooperation in bilateral relations. The differences in historical perceptions and political systems are cited as factors affecting the stability of Japan-China relations.