A customer walks past Sony LED televisions at a home appliance store in Shanghai. File photo: IC
There is no clear evidence indicating that large scales of Japanese firms are leaving China, an expert told the Global Times on Sunday, following a report that said Japan's business community hoped the Chinese government would simplify the procedures for Japanese companies looking to withdraw from China.
A delegation of more than 200 Japanese businessmen visited China from Tuesday to Saturday, during which, the Japanese side expressed the hope that the Chinese government would further improve the investment environment for companies from Japan, as well as simplify procedures for them to withdraw from the market, The Nikkei, Japan's financial newspaper, reported on Thursday.
"It's a fact that Japanese investment in China has been declining in recent years," Feng Wei, a professor specializing Sino-Japanese relations from Fudan University, told the Global Times on Sunday.
"The major reasons are caused by rising labor costs, industrial competition in China as well as the political friction between the two countries," he said.
Some Japanese firms hope to move their factories to Southeast Asian countries due to lower costs, noted Feng.
Chen Yan, executive director of the Japanese Corporations (China) Research Institute, said the declining investment from Japan is a common phenomenon.
"Before 2012, large amounts of investment from Japan came into China, which was too fast and too much. It would be very common that the investment from Japan has slowed down during the recent years," Chen told the Global Times on Sunday.
Direct investment from Japan totaled $2.06 billion in the first eight months in 2016, down 8.4 percent year-on-year, according to the latest data from the Ministry of Commerce (MOFCOM). That same figure in the first eight months of 2014 and 2015 was $3.16 billion and $2.25 billion, respectively, as reported by the MOFCOM.
"Indeed, some well-known Japanese companies have reportedly moved parts of their facilities to other markets, but the individual cases don't mean large scales of Japanese companies are leaving the Chinese market," said Chen.
For example, Japan's Citizen Holdings Co closed its watch parts factory in South China's Guangdong Province in order to transfer its facility to Thailand in February 2015, according to media reports.
Chen also noted that most of the Japanese companies which reduced investment in China are from the labor-intensive or high-polluted industries such as the garment manufacturing and foundry industries.
"Due to China's industrial upgrades and economic transition, it's a very common phenomenon for those labor-intensive firms to move into markets with cheaper costs," Chen said.
Meanwhile, Japanese firms representing other industries including retail, food manufacturing and logistics hope to enter China's market due to the great potential in the country, according to Chen.
Mutually beneficial ties
"It's bad for both China and Japan if large scales of Japanese companies move out of China," Feng said. "China needs the high-end patented technology from Japan in the auto, computer and handset industries. Meanwhile, Japan needs to boost its own economy, partly through trade."
Japan saw a goods trade deficit of 18.71 billion yen ($184 million) in August, marking the first red ink in three months, the Xinhua News Agency reported on Wednesday. Trade with China saw a deficit of $3.38 billion in August, with exports down by 8.9 percent year-on-year to $9.53 billion, and imports down by 15.4 percent year-on-year to $12.91 billion, according to the report.
Certainly, China should further improve its investment environment to attract more foreign investors and focus on its own economic restructuring to maintain a sound and stable economy, said Feng.
"Sound economic ties between the two countries are good for both sides," he noted.
Chinese Vice Premier Zhang Gaoli also called for more contributions from Japan's business community on Wednesday to deepen economic ties and improve relations, Xinhua reported Thursday.
China is currently making efforts to improve the investment environment for foreign companies. On September 9, Chinese Vice Premier Wang Yang said that the country would further expand market access, improve policies and protect the legitimate rights of foreign investors, according to Xinhua.