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Japan’s manufacturers grow cautious about production in China

  • May 20, 2019
  • , Nikkei Asian Review , 5:28 p.m.
  • English Press

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TOKYO — The intensifying trade war between the U.S. and China has sparked caution in Japanese manufacturers about production activity in China, a recent survey by a Tokyo think tank shows.

 

Asked about business plans in China over the next few years, 28% of the respondents said they plan to increase local production, according to the survey conducted in February by Tokyo’s Mizuho Research Institute. The figure was down from 41% in the previous survey a year ago.

 

Companies saying they planned to reduce production doubled to 10%.

 

The survey indicated many Japanese manufacturers have increased production in Southeast Asia while trying to reduce investment in China.

The survey was sent out in February to about 4,300 Japanese manufacturers with capital totaling 10 million yen ($90,700) or more, of which about 1,000 returned valid responses. Japanese manufacturers’ cautious stance toward China may have grown even more from the time of the survey, as the trade friction has intensified further.

 

The index of satisfaction on revenues, which is obtained by subtracting the ratio of respondents who were dissatisfied or slightly dissatisfied with their revenue levels at Chinese operations from the ratio of those who were satisfied or slightly satisfied, was 6.5 points, falling significantly from 16.9 points in the 2018 survey. By industry, the figure deteriorated particularly sharply for those including textiles and apparel, transportation equipment, nonferrous metals, and iron and steel.

 

 

Asked whether they were seeking to relocate their Chinese bases for U.S.-bound exports, 70% answered they had no such plans. However, nearly 70% indicated an inclination to boost production in member countries of the Association of Southeast Asian Nations.

 

The respondents were not as aggressive as one might expect about relocating export bases in China partly because many of them had already diversified them to ASEAN countries in response to deterioration in the Japan-China relations that started in 2012.

 

“Many Japanese companies think they can increase production at their Southeast Asia operations to deal with” higher tariffs resulting from the U.S.-China trade war, according to Mizuho Research Institute senior analyst Koji Sako.

 

There is a possibility, however, that moves to relocate export bases to the U.S., in addition to ASEAN countries, may grow if the trade war continues in the long term.

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