Japan firms showing greater interest in China market: Jetro

Annual poll findings reflect shift towards Asia and away from America, Europe

By ANTHONY ROWLEY
22 March 2010

Moves by the government to strengthen national ties with China are being matched by businessmen who are stepping up their rate of investment in China, with an eye especially on sales to the expanding base of Chinese consumers.

The Japan External Trade Organisation (Jetro) said: ‘Japanese firms’ willingness to expand business overseas has recovered from the effects of the financial crisis, and they are increasingly eyeing China and other Asian countries as destinations for boosting sales.’

In what is seen as a significant development, firms are also showing increasing interest in expanding sales to local firms in China and Asia while focusing on the newly rich, middle class and low income groups as consumer targets in these markets.

Since coming to power six months ago, Prime Minister Yukio Hatoyama’s government has put priority on reinforcing diplomatic relations with China and other Asian neighbours while seeking to achieve a ‘more equal’ relationship with the US.

This is in contrast to Liberal Democratic Party-led governments that ruled Japan for 50 years until last September and that emphasised relations with the US and that often cautioned Japanese business against ‘excessive reliance’ on the China market.

Jetro’s latest annual survey of the international operations of Japanese firms drew a response from nearly 1,000 companies of various types and sizes and its findings reflected an ongoing shift of corporate focus towards Asia and away from the US and Europe.

Last week, leaders of a dozen leading business federations from across Asia meeting in Tokyo urged governments of the region to implement an ambitious series of actions designed to create an integrated Asian economic and business area.

They called for a ‘comprehensive Asia development plan’ to include regional economic integration measures, opening up of Asian markets, provision of regional infrastructure and measures to spur greater domestic consumption in the region.

‘For a long time, the West has led the global economy but now the wind is blowing from the East,’ said Fujio Mitarai, chairman of the business federation Nippon Keidanren, who later presented the proposal to Mr. Hatoyama.

Nearly two-thirds of the firms that responded to the Jetro survey already have an overseas base and 75 per cent now have operations in China compared with 45 per cent in the US.

‘China ranked highest in the sales base and production base categories,’ said Jetro, which noted that the number with a China presence rose by nearly three percentage points in the space of one year.

Firms are seeing China not only as source of sales but also of outsourcing

The number of companies planning to expand their overseas presence, meanwhile, jumped by nearly six percentage points to 56 per cent and ‘China ranked top’ by destination and functions’, Jetro reported.

The next most important destination for future corporate investment included Asia’s newly industrialised economies (NIEs) – Hong Kong, South Korea, Singapore and Taiwan – as well as Vietnam and Indonesia.

Jetro also found that firms operating in Asia are making increasing use of free trade agreements – those in which Japan is directly involved and also those involving third countries that have FTAs among themselves and where Japanese firms have operations.

Companies also intend to make good use of FTAs that have recently come into force between Asean and India, Asean and Australia and Asean and New Zealand, Jetro added.

In the past, companies – smaller firms especially – complained that FTA arrangements were often too complex for them to make use of, or that they were unaware that such arrangements were in force. These attitudes appear to be changing, according to Jetro.

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