“In addition to earning money in China, where else?” Kenji Shimizu, head of the Guangzhou Representative Office of the Japan Trade Promotion Agency, said to the reporter of “Global” magazine with some helplessness when talking about the development of Japanese companies this year.
The news of “a large number of Japanese companies queuing to withdraw from China” this year made him quite surprised, because whether it was from the Japan External Trade Organization’s investigation of Japanese companies in China, or based on the effectiveness of his promotion of Japan’s supply chain reform measures. Look, this argument is untenable.
“Let’s not say whether the term “a large number of Japanese companies” is appropriate. Even companies that really decide to leave China may be unable to compete with the rising companies in China, and their business volume has decreased and they have to find new ones. The market is not responding to the (Japanese) government’s supply chain plan.” Shimizu said.
The truth about the “evacuation” of more than 1,700 Japanese companies
Since the beginning of this year, Japanese political circles have repeatedly mentioned “reducing dependence on China”. In March, the then Japanese Prime Minister Shinzo Abe stated at the “Future Investment Conference”: “As China and other countries supply less products to my country, the impact on my country’s supply chain is worrying, so it is dependent on a country and has high added value. For products, we seek to return production bases to our country, and for other products, try not to rely on one country as much as possible, and disperse production bases to Southeast Asia and other places to achieve diversification.”
On April 7, the Japanese government issued the “New Coronavirus Infection Emergency Economic Measures”, which includes a plan for companies to reform the current fragile supply chain, providing 243.5 billion yen (approximately 15.4 billion yen) to companies willing to return to the country. RMB) financial budget support. In July, the Ministry of Economy, Trade and Industry of Japan announced the first phase of the list. 87 companies received a relocation subsidy of 73 billion yen, of which 57 returned to the mainland and 30 moved to Southeast Asia. On August 5, the second phase of the situation was announced. According to statistics, 1,670 companies filed applications. This is also the source of the news that “more than 1,700 Japanese companies lined up to leave China” in some media.
This plan is divided into two parts, “subsidies for domestic investment” and “support for diversification of overseas supply chains,” with fiscal amounts of 220 billion yen and 23.5 billion yen respectively. The Japanese government’s subsidy conditions are: return to Japan for the production of manufactured products and parts that are highly dependent on a certain country, or diversify production bases to other countries and seek diversification of production areas. Judging from the list of companies announced by the Japanese Ministry of Economy, Trade and Industry, there are currently more than 40 companies that have received subsidies, including protective masks, genetic testing reagents, disinfection alcohol, etc., and more than 40 manufacturers of epidemic prevention products, which are the main automobile manufacturers of Japanese companies in China , Financial and commerce companies are not among them.
If you look carefully at this list of companies, you will find that some of the subsidized companies are not “evacuating”, but building new factories under the pressure of smooth import and export under the epidemic. For example, I’m Corporation in the first phase of the list established I’m Technology Co., Ltd. in Suzhou, China in March 2005. According to the company, the Japanese government subsidies are mainly used to build new plants in Japan. To produce non-woven masks that its Chinese company did not produce, the company did not consider exiting the Chinese market.
Another Higashine City pharmaceutical company, Ace Japan, had difficulty importing chemical raw materials from China during the epidemic and decided to use Japanese government subsidies to build a chemical raw material factory in Japan to produce raw materials that could not be imported to complete the order on time.
In other words, the Japanese government’s supply chain reform plan does not presuppose “withdrawing from China”, which is confirmed by Rinda Lang Tanaka of the Public Support Department of the Guangzhou Representative Office of the Japan External Trade Organization. He told the reporter of “Global” magazine that most of the companies that applied for subsidies to the Japanese government are mainly for new projects, or they have plans to transfer their production lines to Japan or Southeast Asian countries. “The government’s policy orientation is not It will affect the company’s investment decision, and companies still have to follow the market. Most Japanese companies invest in China with the goal of the Chinese market and do not want to move.”
Judging from the survey report on Japanese companies in China conducted by the Japan External Trade Organization’s Beijing Representative Office, in 2015 and 2019, the proportion of Japanese companies in China that expanded, maintained, and reduced their business in China remained basically stable, among which companies that plan to reduce their business in China It is relatively small. Except for the proportion reaching 8.8% in 2015, it is between 5% and 5.4% in 2016 and 2019. The Guangzhou representative office of the same institution conducted a survey of about 3,500 Japanese companies in southern China in April. Among them, 91.7% of the Japanese companies stated that they did not plan to transfer their business in China, an increase of 6.9 percentage points from the survey in February.
In response to the reasons why Japanese companies are shrinking their business in China, the report shows that the top five factors are: reduced local sales, increased costs, sluggish exports, difficulty in securing labor, and low development potential. The impact of the reduction in local sales has continued to increase. In 2018, the proportion of companies that answered this reason was 37.5%. In 2019, this number has risen to 66.7%.
In September, at the press conference of the “China Economy and Japanese Enterprises 2020 White Paper” by the Japan Chamber of Commerce in China, Takeo Dogami, director of the Beijing Representative Office of the Japan External Trade Organization, clarified the statement that “the Japanese government encourages Japanese companies to leave China” and pointed out the subsidy policy Not specifically for China, but for the whole world. It is not about encouraging withdrawal. It includes the situation of building new factories in Japan while retaining production lines in other countries.
They “deep into the Chinese market”
In June, 8 new stores; in August, 19 new stores…Under the background of the spread of the global COVID-19 epidemic, Uniqlo’s speed of opening stores in the Chinese market is impressive. In August, 19 stores were opened in 18 cities, and 6 cities including Tongxiang in Zhejiang, Danyang in Jiangsu and Bengbu in Anhui entered for the first time.
“China is Uniqlo’s largest overseas market. Uniqlo hopes to deepen the Chinese market by releasing new apparel products suitable for Chinese consumers and accelerating its sinking to more second, third, and fourth-tier cities.” Wu Pinhui, Global Senior Vice President of Sales Group and Chief Marketing Officer of Uniqlo Greater China, said recently.
The latest growth forecast released by Fast Retailing Group in October shows that benefiting from factors such as expanding stores in China, the group’s consolidated net profit for the 2021 fiscal year (ending August 2021) is expected to hit a record high. The company’s share price is October 16 It also hit a new high since its listing, ranking seventh in Japan.
Large Japanese companies are busy expanding in China, what about small and medium-sized companies?
In 2018, the Japanese company Morpho, which focuses on image software, established Moore Image Technology (Shenzhen) Co., Ltd. in China. It has successfully provided services to well-known Chinese companies such as Huawei and Xiaomi. Zheng Fenglong, director and product director of the company, is one of the four personnel dispatched by the head office to China. He told the reporter of “Global” magazine that the Chinese subsidiary is currently the best operating overseas subsidiary, and the company has not withdrawn any of China’s subsidiaries. The plan is to continue product research and development in order to compete with the rapidly progressing Chinese companies in the huge Chinese market.
Regarding the industrial transfer of Japanese companies, Zheng Fenglong said that it is more related to the local economic development and market potential. In recent years, the business rate of Morpho’s South Korea branch has been declining, because the country’s self-research rate has steadily increased, which has led to a decline in the branch’s market share, but the company currently has no plans to withdraw from South Korea.
“In China, our competitors are very strong, so our next development is likely not to “clone” the headquarters, but to have our own roadmap in R&D and sales based on the uniqueness of the Chinese market. From the current point of view, Because of fierce competition and high market demand, our technology generation gap is smaller than that in Japan, and it is very likely that the technology level will exceed the local level in the future.” Zheng Fenglong said.
Uga Shinhiro, general manager of Asahi Glass New Electronic Display Glass (Shenzhen) Co., Ltd., felt the same way. The company’s factory is now rushing to work day and night. “Under the background of the epidemic, people’s purchases of electronic products have increased, which has caused the demand for electronic display glass to increase, and orders have increased. Who wants to withdraw?” Uga Shinhiro said to a reporter from Global magazine.
Asahi Glass is currently in the upper reaches of the industrial chain, and its direct supply downstream companies are Chinese companies. Its positioning in the Chinese market not only prevents it from withdrawing from China, but also produces products that are different from its Japanese parent company. “China’s generational change is faster, and many of our production lines have not been updated in Japan. This is one of the reasons why we are optimistic about the Chinese market.” Uga said.
Yin Xiuzhong, a lawyer and partner of Guangdong Zhuojian Law Firm, who provided legal services to many well-known Japanese companies including Panasonic, told reporters of “Global” magazine that after the international financial crisis in 2008, Japan proposed the “China +1″ The strategy is to actively expand to Vietnam, Thailand, Indonesia, the Philippines and other countries in addition to the layout in China. Some Japanese-funded small and medium-sized enterprises will subsequently transfer all or part of their production lines to Southeast Asian countries where labor costs and land prices are lower. It seems that the transfer of Japanese companies to Southeast Asia has been basically completed.”
He pointed out that in China, especially in southern China, most Japanese companies are manufacturing companies, such as large automakers such as Toyota and Honda, whose business is originally aimed at the Chinese market and is unlikely to withdraw. The so-called Southeast Asia, and At present, Japan is discussing a lot of transfer to India, and it is more about the parent company’s multi-dimensional expansion of business while retaining its business in China; moreover, the Japanese high-tech companies that have frequently settled in Guangdong, Shanghai, and Jiangsu in recent years, mainly in China For sales, research and development, China’s huge market, complete industrial chain, and sufficient human resources are unmatched by Southeast Asian countries, so that some Japanese financial institutions are stationed in China and started cooperation with some local cities in scientific and technological projects. All show that most Japanese companies have no plans to withdraw.”
“There is no better place than here”
Moore and Asahi Glass are more or less related to high-tech, and there is no need for transfer. What about traditional manufacturing? In recent years, as China’s factor costs have risen, some foreign investors have turned their attention to lower-cost Southeast Asia. Developed countries such as the United States and Germany have also encouraged the return of manufacturing. Nokia closed its factories in China and Samsung Electronics Communications (Shenzhen) withdrew. It was a sensational news. Field surveys conducted by reporters from “Global” magazine in manufacturing clusters such as Dongguan and Foshan show that some labor-intensive Japanese companies are indeed considering adjusting their industrial chain layout, but most of them have no plans to withdraw from China.
Sansakura Industry Co., Ltd., which mainly produces automobile brake systems and engine system parts, is a large company with about one-third of the Japanese market. It established Sansakura (Dongguan) Automotive Parts Co., Ltd. in Dongguan in 2012 At present, there are 5 factories in China, and the others are in Tianjin, Wuxi, Guangzhou and Wuhan.
Jin Xiannu, head of the personnel and general affairs department of the Dongguan branch, told the reporter of “Global” magazine that despite the epidemic, the Japanese staff sent to Dongguan from the head office returned to China on February 10, and the start of the factory was not affected. The current orders are very stable. , Because 95% of its products are provided to Chinese domestic manufacturers, and the allocation of raw materials is also carried out in China. According to her knowledge, the head office does not have any plans to transfer the industrial chain in the next three to five years, nor does it plan to increase investment or expand in other countries.
However, she said frankly that the recruitment problem is indeed a major problem that currently plagues the company. “The increase in labor costs, coupled with the serious seasonal loss, we have to recruit many temporary workers to supplement the labor force.”
Dongguan Youneng Tools Co., Ltd. (hereinafter referred to as Youneng), with annual sales of about 200 million yuan, was established in November 2002. It is an overseas branch wholly-owned by Japan Youneng Co., Ltd., which mainly produces and sells high-speed precision CNC machining. Super hard tools, drill grinding machines and molds. The company’s management and manager Koji Katagiri told the reporter of “Global” magazine that after the factory resumed work on February 17 this year, the procurement and sales of materials were not greatly affected.
“I have been employed for more than ten years, and my basic salary has increased from 345 yuan to the current 1,900 yuan. It can be seen that labor costs have indeed increased rapidly.” Chen Jihui, deputy manager of the General Affairs Department of Youneng, told reporters that the company produced products in 2002 In the Chinese market, demand is in short supply and there is no need to worry about orders. However, since 2008, competition has become increasingly fierce and the business volume of domestic companies has continued to increase. Although the output of Youneng has increased, the profit margin has decreased. Moreover, “We established a factory in Dongguan earlier , The equipment is old, the factory floor area is not enough for the current production capacity, and it needs to be updated.”
Regarding the difficulties encountered by Japanese enterprises in their operations, Gao Zhiquan, deputy director of the Economic Development Promotion Center of the Management Committee of the Dongguan Water Township Characteristic Development Economic Zone, told the reporter of “Global” magazine that the management committee is working hard to help solve them, hoping to retain high-quality Japanese capital Enterprises to achieve industrial upgrading in Dongguan.
The Dongguan Water Township Management Committee was established in May 2019 to change the lack of investment planning and backward industrial models in the past, integrate the resources of the five towns in Dongguan, and fully empower the city to focus on overall development planning, regional development, and investment The five major aspects of investment, construction of major projects, and improvement of government services and transportation have fully realized industrial transformation and upgrading.
“Samsung Electronics and Communications left China because it was unable to cope with the competition. Japanese companies did not want to follow in their footsteps,” Gao Zhiquan told reporters with confidence. “There are currently more than 20 Japanese companies in the water town. As far as I know, I haven’t thought about it. The reason for withdrawing from Dongguan is that the upstream and downstream of the industrial chain are here, which is the foundation of the enterprise; the second is that Dongguan has a geographical advantage and is very close to the port and the airport; the third is that the business environment in Dongguan is also very good “He pointed out that the current investment promotion focus of the Management Committee can be summarized in two words, which is to “keep the chain” and to ensure that at least 67.5% of the industrial chain can be solved in Dongguan.
Foshan Waseda Technology Service Co., Ltd. is located in the South China Concentration Area of the National Environmental Service Industry. It mainly provides environmental diagnosis and consulting services, and Sino-Japanese business docking services for Chinese and Japanese companies in South China. Its service objects include Toyota, Honda, Hitachi Shipbuilding and other Japanese companies. Enterprise. Chairman Lin Cisheng told the reporter of “Global” magazine that according to his knowledge of Japanese companies that applied for relocation subsidies, many of them are companies that already have relocation plans and are relatively small in scale. They are not the mainstream of Japanese companies in China.
After the outbreak of the COVID-19 epidemic, Japanese companies on the one hand perfected their industrial chains in China, on the other hand they consciously acquired Chinese bankrupt companies and increased investment. “Only Chinese manufacturers in the world can produce normally, so many Japanese companies do not want to transfer, but have the idea of increasing capital and expanding production. And as far as I know, some labor-intensive Japanese companies that have moved to Southeast Asia have found that although labor costs have been reduced, labor The quality and infrastructure are not up to ideal conditions, and most of the products are sold in China, so I regret it very much.” Lin Cisheng said.
Toshihiro Iwamoto, general manager of the Guangzhou branch of Shenzhen Domestic and Overseas Building Decoration Engineering Co., Ltd., who is handling engineering matters in Foshan, told the reporter of “Global” magazine that all the Japanese-funded enterprises in southern China he serves, “not one has applied for subsidies to transfer the production chain. I am. I think only one of the 500 Japanese companies in China will apply. Why stay in China? Because for companies, there is no better place than here!”
He said that with the overall transformation and upgrading of Guangdong’s industry, the development of traditional manufacturing has indeed been affected. Some Japanese-funded enterprises have begun to migrate to inland China. However, due to high logistics costs and a less favorable business environment than coastal areas, It is also more distressing, but as long as the government can give manufacturing companies a reasonable room for development, the company will not leave.
Do foreign companies want to leave? Data is the best answer. On October 16, data released by the Ministry of Commerce showed that from January to October 2020, the country’s actual use of foreign capital was RMB 80.68 billion, a year-on-year increase of 6.4%. Among them, the actual use of foreign capital in the service industry increased by 16.2%, and the high-tech service industry increased year-on-year. 27.8%. This shows that not only the total amount of foreign investment attracted by China is increasing, but also the structure is optimizing and the quality is improving.
Zong Changqing, Director of the Foreign Investment Department of the Ministry of Commerce, said that China’s effectiveness in stabilizing foreign investment this year once again proved that China’s super-large-scale market’s attractiveness to foreign investment has not changed, and its comprehensive competitive advantages in industrial facilities, human resources, and infrastructure have not changed. Expectations and confidence in long-term investment and operation in China have not changed.