Japanese Business Turns Its Back on China
Japanese businesses once had high hopes for the Chinese market and were a significant source of foreign investment flowing into China. However, they have now abandoned their former enthusiasm.
As Japan works to get its economy back on track in the face of escalating tensions with the United States and an increasingly hostile Europe, the shifting attitudes of Japanese businessmen and investors have undoubtedly displeased the Chinese Communist Party (CCP), placing Xi Jinping and his colleagues under more severe economic and financial challenges.
The recent change in attitude of the Japanese business community aligns with that of other developed countries. The business communities of the United States and the European Union have almost entirely lost confidence in China’s previous reliable reputation. During the pandemic, Beijing’s zero-Covid policy, quarantines, and containment measures disrupted supply chains, leading many Western countries to believe that diversifying procurement channels and moving supply chains from China to other Asian regions is the best option. These efforts have not only caused China to lose exports but also economic vitality and sources of employment, as well as the investments that the economic growth trajectory depends on.
If the loss of confidence by the business community was not enough, Western governments have also turned their focus on the CCP. Washington has openly declared hostility. Despite President Joe Biden reflexively overturning everything done by the Trump administration, he has retained the tariffs imposed on Chinese imports in 2018 and 2019. The Biden administration recently expanded the scope of tariffs, increasing tariffs on Chinese-made electric cars, components, batteries, as well as solar panels, wind turbines, medical equipment, steel, aluminum, and computer chips. The EU has not gone this far yet, but in response to China “dumping” electric cars in its market, it has also threatened to impose tariffs.
In contrast, the Japanese government has been quite low-key on issues related to tariffs or other anti-trade measures. Japan has shown mistrust towards China in other aspects. This hostility stems from China’s actions a few years ago when the CCP government cut off exports of rare earth minerals to Japan. Beijing was unhappy with Tokyo’s refusal to relinquish rights to disputed islands in the East China Sea. As a result, Tokyo has been pushing for the Group of Seven (Canada, France, Germany, Italy, Japan, the UK, and the US) to seek and develop rare earth mines outside of China. However, it is not the Japanese government but Japanese businesses that hold the greatest skepticism towards the CCP.
A large-scale public opinion survey conducted by the Japanese Chamber of Commerce shows that an increasing number of members believe that China’s economic situation will deteriorate in the remaining time of this year and in the future. This sudden shift in sentiment occurred because just last January, only about 39% of members believed that the Chinese economy was weakening, which is not a small number, but compared to the recent surveys from March to April where over half of the members held negative views, the contrast is stark. Nearly a quarter of respondents indicated they would reduce investment in China, while another quarter said they would not invest at all, with only 16% planning to increase investments.
Certainly, compared to the pessimism in the Japanese business community and the hostility of Western governments, China faces even greater economic and financial problems. China still faces a massive real estate crisis, and in fact, the recent trillion-dollar plan for the government to purchase empty houses has still not met the demand. Chinese consumers have lost confidence in the future and are unwilling to spend, while private enterprises in China have also become very pessimistic, reducing investment and hiring.
If Japan were to adopt a more positive attitude towards trade and investment with China, it would be helpful. However, the reality is far from it, and Beijing must overcome even steeper, rugged, and towering obstacles to regain prosperity.
This translation and rewrite do not necessarily reflect the original publisher’s stance.