China trade the focus in Japan
In a clear sign that Japanese investments on the mainland are about to soar, more than a third of a white paper on international trade issued by the Ministry of Economy, Trade and Industry in Tokyo yesterday was devoted to China's rise.
While Japanese firms have primarily moved labour-intensive export-oriented manufacturing to the mainland, there are signs that the nation's large firms are now increasingly turning to the mainland's consumer markets for profits.
'Looking at the earnings performance of Japanese companies' overseas business activities over the past 10 years, export hub activities in the Asian region have contributed to earnings of Japanese companies,' the report said.
'However, in recent years, with the expansion of the Chinese consumer market in contrast to the stagnation of the domestic Japanese consumer market, we are seeing a rapid rise in Japanese presence in China.'
Japanese companies generated 161 billion yen (HK$10.4 billion) in profits on the mainland in 2000, roughly 17.8 per cent of total profits generated in East Asia, up from virtually nothing in China in 1990.
In 2000, there were 1,712 Japanese firms operating on the mainland, up from only 150 in 1990. That year, Japanese firms with operations on the mainland made up only about 5 per cent of Japan's business presence in all of East Asia. By 2000, that number had risen to 25 per cent.
Meanwhile, the mainland's private consumption rate is growing at over 8 per cent a year, compared with about 2 per cent in Japan.
Japanese companies invested 159 billion yen on the mainland in 2001, but the white paper projected that annual investments would rise to up to 300 billion yen range in the coming five years.
Japanese multinationals will increase their investments on the mainland by up to 77 per cent in the next few years.
The Japanese ministry's projections did not surprise analysts. In a recent report, Kathy Matsui, a Japan investment analyst with Goldman Sachs in Tokyo, said she had noticed that major institutional investors used the 'China play' criteria in deciding whether to invest in Japanese securities.
'China appears to be this year's most popular theme, and nearly every investor is anxious to find those Japanese firms poised to benefit - and lose - from the China phenomenon,' Ms Matsui said.
