China losing appeal for Japanese companies amid falling economy

As China is facing the impact of COVID-19-related lockdowns on its economy and the escalating tension between Beijing and Washington over Taiwan Straits, a large number of Japanese companies including chip makers have begun moving out of China.

The Singapore Post citing a Japanese media outlet Asahi Shimbun reported that 135 companies engaged in the manufacturing of semiconductors, cosmetic items, clothing, household appliances and motor vehicles have begun dismantling their operations in China.

While several Japanese companies are relocating their manufacturing bases to Vietnam and the countries of the South Asian region, several other companies are coming back home since they feel the weaker yen is hurting their profits.

Experts say that China's weakening growth is a result of two months of lockdown in Shanghai, tougher COVID-19 restrictions in other parts of the country and disruptions in the manufacturing, logistics and tourism sectors.

Japan has about 90 per cent of its products manufactured abroad and of this, a large number of products are made in China. Top Japanese multinational companies including Toyota, Honda, Nissan, Mazda, Suzuki, Kawasaki, Mitsubishi, Toshiba, Hitachi, Sony, Nikon, Canon, and Pioneer have their bases in China, as per The Singapore Post.

Citing a survey done by the Japan-based financial research and support services, The Singapore Post reported that as many as 249 Japanese companies left China between 2016 and May 2019.

However, in 2022, ongoing effort by Japanese companies to locate their manufacturing capacities outside China gained momentum as 135 companies have either left the Chinese shore or are on the verge of relocating them outside the Middle Kingdom.

Due to suspension of auto part plant operations owing to pandemic-related lockdowns in Shanghai and other parts of China, global production of Toyota Motor Corp, as per the Asahi Shimbun, declined by 9 per cent year-on-year to 690,000 vehicles, while Honda Motor Co, witnessed a 54 percent decline and Hino Motors Ltd recorded a 27 per cent drop.

Meanwhile, Chinese Premier Li Keqiang had said that China had reached its most difficult stage of economic stabilization and called on leaders of key provinces to coordinate efforts on economic recovery.

"The economy continued to recover in July, but small fluctuations are still present. We are now at the most tense stage of economic stabilization, so we need to build a solid foundation for economic recovery without wasting time," Keqiang said at a meeting with leaders of the provinces of Guangdong, Jiangsu, Zhejiang, Henan, Shandong and Sichuan, as quoted by Xinhua news agency.

Keqiang said that measures to combat COVID-19 must be coordinated based on the need to rebuild the economy.