In the past four decades, Japanese companies have invested massively in the Chinese market. However, due to the Chinese regime’s unpredictability and economic downturn, India has emerged as the most popular country for Japanese companies.
The Japan Bank for International Cooperation (JBIC) released its 2023 Annual Survey Report on Dec. 14 on Japanese companies with manufacturing and production plants in China. The survey is about the countries and regions in which Japanese companies hope to invest and expand their business in the next three years. A total of 534 Japanese companies responded to the survey.
According to the survey results, India topped the list of countries in which Japanese companies would like to invest for the second consecutive year; Vietnam jumped to second place from fourth place last year; and China dropped to third place from second place last year, with the lowest percentage of votes since the survey began in 1992.
Compared to last year, India’s vote share in the survey has increased by 8.3 percent to 48.6 percent; Vietnam’s vote share has increased by 1.2 percent to 30.1 percent; and China’s vote share dropped by 8.7 percent to 28.4 percent. The U.S. market also dropped 5.1 percent to 27.1 percent. High inflation and rising production costs likely caused the United States to drop in the rankings.
According to the analysis in the report, India received such a high percentage of votes and topped the list for the second consecutive year because India’s future market is highly evaluated.
The report also explained that India’s population has already surpassed China’s to become the world’s most populous country, and it will continue to grow in the future. There is also a huge potential to expand domestic demand in India in the future, which is of great value for Japanese companies. In addition, India has a plan to improve its infrastructure and business environment, which will make it easier for Japanese companies to invest there.
Lack of Confidence in the Chinese Market
Statistics show that from 1992 to 2023, Japanese companies’ interest in investing in China has changed considerably. To summarize, from 1992 to 2012, China dominated the survey with an average of about 70 percent of all the companies choosing China, with a high of more than 90 percent in 2003. This trend dropped to below 40 percent by 2013 and then rose to 47.6 percent in 2021. However, in the past two years, this number has been in free fall.There are many reasons for Japanese companies to wish to leave China, such as the U.S.-China confrontation leading to tighter import and export controls in both countries, China’s economic slowdown, insufficient protection of intellectual property rights by the Chinese regime, the difficulty for Japanese companies to compete with Chinese companies in terms of pricing, the rising cost of labor, the ambiguity in the legal system, and the strict control of foreign currency, among others.
In addition to the economic reasons, there are also many political reasons. Under the influence of the Chinese Communist Party’s (CCP) propaganda, anti-Japanese sentiment is still widespread among the Chinese people, and the regime has manipulated the people to boycott Japanese goods from time to time. There have also been recent confrontations around Japan’s discharge of treated nuclear wastewater into the ocean. Japan’s increasingly assertive attitude toward the CCP has further aggravated Japan-China relations.
Japan’s Contribution to China’s Economic Development
At the end of March 2022, Japan ended over 40 years of Official Development Assistance (ODA) to China. During these four decades, the Japanese government has provided China with approximately 3.3165 trillion yen ($23.3 billion) in loan aid (yen loans), 157.6 billion yen ($1.1 billion) in grant aid, and 185.8 billion yen ($1.3 billion) in technical cooperation.The Japanese government’s ODA assistance to China began in 1979, with major projects including airports, power stations, hospitals, infrastructure, education, human resource development, and so on.
In August 1978, China and Japan concluded the Sino-Japanese Friendship and Trade Treaty. In the same year, then-Chinese leader Deng Xiaoping visited Japan and rode on Japan’s Shinkansen high-speed trains and viewed major Japanese industrial centers. The modernization of Japanese industry was an eye-opener for Mr. Deng, who then proposed that China should implement a policy of “reform and opening up” and urgently requested foreign aid.
At that time, China was still in the aftershocks of the Cultural Revolution, and even the World Bank would not give China any loans. Japan was the first country in the world to provide China with loans and development assistance.
From 1979 to 2022, Japan was China’s largest source of development assistance, accounting for 66.9 percent of the world’s total aid to China. However, most Chinese people are unaware of this due to the CCP’s anti-Japan propaganda.
Along with China’s “reform and opening up” and Japan’s development assistance, almost all large Japanese companies and trading firms have opened branches in China. By June 2022, there were 12,706 Japanese companies in China, covering a wide range of industries including manufacturing, commerce, logistics, design, consulting, IT, etc.
Over the past 40 years, China’s economy has experienced high-speed development and has become the world’s second-largest economy.
However, the CCP is reversing decades of economic reforms, causing Japanese companies to seek alternatives to China due to the regime’s instability.
