A growing number of Japanese companies in China are expressing pessimism about the Chinese economy. The latest quarterly survey shows that 60% of Japanese companies in China predict that the Chinese economic situation this year will be “worse” or “slightly worse” than last year, significantly higher than the previous survey’s 50%, marking the third consecutive quarter of increase.
Last Friday, the China-Japan Chamber of Commerce, a Japanese business organization in China, released the latest quarterly survey results (April-June) on the business conditions and operating environment of its member companies.
Among them, 22% of the surveyed Japanese companies believe that the Chinese economic situation this year will be “worse” than last year, a 7-point increase from the previous survey in May covering the first quarter (January-March); while 38% of companies foresee it will be “slightly worse,” a 3-point increase from the last survey.
Moreover, only 1% of Japanese companies think that the Chinese economic situation this year will be “better” than last year, remaining consistent with the previous survey; and 10% believe it will be “slightly better,” down 4 points from the last survey. In total, only 11% of Japanese companies expect any improvement in their overall business conditions, a 4-point decrease from the previous quarter, indicating a sharp increase in the number of companies anticipating challenging prospects for the Chinese economy.
Regarding investment figures, 45% of Japanese companies stated that they will “decrease” or “not decrease (maintain the same)” their investments this year, remaining largely consistent with the previous survey (44%); with only 15% of companies planning to “increase” or “significantly increase” their investment compared to the previous year.
Most surveyed companies attribute the reduction in investment to the “uncertainty of the Chinese economy” and “intense competition leading to price reduction and uncertain profit prospects.”
In terms of the business environment, 58% of Japanese companies stated they are “very satisfied” or “satisfied,” while 42% of respondents expressed a desire for improvement. Among them, 80% indicated that the treatment is “better than (Chinese) domestic companies” or “the same as (Chinese) domestic companies,” with this proportion continuously increasing for the fourth time.
In the area where respondents felt they were not treated the same as domestic companies in China, 51% of Japanese companies cited “regulatory enforcement,” 39% chose “government financial support/subsidies (for research and development support, cost investment),” and an additional 26% of respondents selected “tariff procedures,” showing an increase of 7 points from the previous survey.
Additionally, a significant number of surveyed Japanese companies are urging the reinstatement of the Japanese short-term visa-free entry policy that was suspended due to COVID-19. Following the incident where a Japanese school bus was attacked in late June in Suzhou, Jiangsu Province, an increasing number of Japanese companies are calling for the protection of “the personal safety of Japanese residents.”
Tetsuro Honma, the President of the China-Japan Chamber of Commerce and Vice President of Panasonic Corporation, stated in his speech, “There are 31,300 Japanese companies in China that have created many job opportunities and contributed to the economic development of China.”
He expressed concerns from some Japanese companies in China about the business situation and hoped that the Chinese authorities and local governments would take appropriate economic measures to improve the situation.
Honma also mentioned that the organization will continue to collaborate with Japanese business groups in various regions of China to improve the business environment for Japanese companies in China through lobbying the Chinese authorities and local governments, and reporting the current situation of Japanese companies in China to the Japanese government and embassy.
The survey was conducted in late July among approximately 8,000 Japanese-funded enterprises in China and other Japanese institutions, collecting a record-high of 1,760 responses, making it the highest response rate in years.