Japanese companies are facing significant headwinds in the Chinese market, with investment figures showing a marked decline. According to recent data from Japan’s Ministry of Economy, Trade and Industry, Japanese investment in China and Hong Kong fell by 16% year-on-year in the second quarter of 2024. This marks the seventh consecutive quarter where Japanese investment in China has lagged behind its European counterpart.
The downturn is largely attributed to the struggles of Japanese automakers in China’s competitive electric vehicle (EV) market. Giants like Nissan and Honda have been forced to shutter factories, with Honda alone estimating a reduction of 290,000 units in annual production capacity. This retreat has sent shockwaves through the supply chain, affecting parts manufacturers and material suppliers.
The automotive sector’s woes are symptomatic of broader challenges. China, while remaining Japan’s second-largest export destination and primary import source, has become an increasingly difficult market for Japanese firms. A survey by the Japan External Trade Organization revealed that 53% of Japanese manufacturers in China view rising competition as a major concern, a situation exacerbated by China’s economic slowdown.
The impact extends beyond automobiles. Companies across various sectors, including electronics and materials, are reassessing their Chinese operations. DIC, for instance, plans to exit China’s liquid crystal materials business by the end of 2024.
As Japanese companies grapple with these challenges, the trend of reduced investment and operational scale-back in China appears set to continue, potentially reshaping the landscape of Japanese business presence in the world’s second-largest economy.
Source: Central News Agency (Taiwan), October 7, 2024
https://www.cna.com.tw/news/acn/202410070137.aspx