Teikoku Databank survey: Some Japanese firms leaving China on uncertain growth outlook

03, Jun. 2019

TOKYO, NNA – Some Japanese companies are pulling out of China amid uncertainty over growth prospects, according to a survey by Teikoku Databank Ltd., a leading credit research house.

The survey, released Friday, showed that there were 13,685 Japanese firms in China at the end of May, down from 13,934 in the previous survey conducted in 2016. The total has declined from a peak of 14,394 in 2012.

The latest poll was conducted to assess business plans and sentiment among Japanese firms amid the escalating U.S.-China trade dispute.

While some firms have expanded production capacity and warehouses, counting on Chinese growth, rising labor and foreign exchange costs have led others to switch to output in Japan or move their factories to Thailand and other Southeast Asian countries, Teikoku Databank said. Stiff competition from online retailers forced some firms out of the Chinese market, it added.

China’s GDP grew 6.4 percent from a year earlier in the January-March quarter, unchanged from the previous three months, but slower than the 6.6 percent posted for the whole of 2018 and 6.8 percent in 2017. Going forward, Japanese economists and government officials expect Beijing to continue providing fiscal and monetary stimulus to support growth.

By sector, there were 5,693 Japanese manufacturers in China at the end of May, down 2.7 percent from 2016 and 4.3 percent fewer than in 2012. There were 472 retailers, down 6.2 percent from 2016 and down 4.8 percent from 2012.

“Judging from the decline in the manufacturing and retail sectors that had led the growth [in the number of firms in China], emerging concerns about the pace of growth in the Chinese economy and rising labor costs are prompting Japanese firms to change their perceptions about the Chinese market,” Daisuke Iijima, a Teikoku Databank analyst who wrote the report on the survey findings, told NNA Monday.

“In addition, Japanese firms seem to regard the increasing uncertainty over the trade friction as a new risk to their businesses.”

China warned last week that it could bar U.S. companies from accessing its supplies of rare-earth metals in retaliation for higher U.S. tariffs on Chinese products.

In its trade talks with Beijing, Washington is threatening to impose new tariffs on $300 billion of Chinese exports this summer, after increasing duties on $200 billion of Chinese goods from 10 percent to 25 percent earlier last month.