• Sat
  • Sep 20, 2014
  • Updated: 10:33pm

Japanese lured back by lower costs, higher sales

PUBLISHED : Monday, 22 April, 2002, 12:00am
UPDATED : Monday, 22 April, 2002, 12:00am

Japanese investors have returned to the mainland, attracted by lower production costs and growing domestic sales, according to the Japan External Trade Organisation (Jetro).


Yoichi Maie, a researcher in Jetro's China-North Asia division, said the resurgence would continue while the mainland economy kept growing.


Japanese investment surged 31 per cent to 109.9 billion yen (about HK$6.72 billion) year on year in the fiscal year to March last year, and Mr Maie expected double-digit expansion to continue this fiscal year.


The Jetro data supports trends indicated recently by leading Japanese companies based in China.


In February NEC, Japan's largest personal computer supplier, said it would shift 70 per cent of production for the Japan market to China within the next fiscal year.


Japanese companies' mainland investments hit a peak in 1995 when flows totalled 431.9 billion yen.


Mr Maie said the Japanese currency was strong at the time, having risen to an exchange rate of 80 yen to the US dollar. Many companies took advantage of this to move production abroad.


But the investment trend slowed after the financial crisis in the following years as the turmoil dealt a serious blow to Asian economies, including Japan.


He said investment interest had now returned since Japanese companies were seeing a bright economic outlook for China following its entry to the World Trade Organisation.


The revival of interest had also been foreshadowed in a study conducted by Jetro.


In October last year, Jetro sent questionnaires to 720 Japanese companies to ask their interest in overseas investment. Of 300 companies who said they planned new investments, 287 named China as the first choice.


The mainland was followed as the preferred target for investment dollars by the United States, Thailand and Indonesia. Hong Kong ranked fifth.


Among the reasons, Japanese companies wanted to increase sales in the vast China market, and hoped to save production costs by transferring manufacturing bases to the labour intensive economy, Jetro said.


Mr Maie said that since many giant Japanese enterprises had moved to China, smaller affiliates or parts suppliers would follow.


For example, if a Japanese car-maker shifted its production lines to China, its parts suppliers would follow. Japanese companies preferred to use Japanese supporting parts.


The study also highlighted Japanese investors' concerns over moving to the mainland.


Most said investment laws in China were uncertain, incomplete and constantly changing, which affected the investment environment.


They were also concerned about restrictions on foreign remittances and the non-convertibility of the yuan.


Mr Maie said Japanese investors also raised concerns over the different treatment of domestic and foreign companies, but that overseas and mainland investors would move gradually to a level playing field after China's WTO admission.


Graphic: jetr22gbz


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