Riots at Japanese factories, stricter customs inspections and other barriers thrown up over a territorial row have reawakened an alarmed Japan Inc to the risks of doing business with China, analysts say.
Although abandoning well-developed manufacturing bases in China is not an option, Japanese firms are starting to look at other countries, such as Myanmar, as alternatives.
Sometimes violent demonstrations erupted in cities across China earlier this month while consumers have boycotted Japanese products in response to Tokyo’s nationalization of three of the Diaoyutai Islands (釣魚台), which Beijing and Taiwan also claim.
Photo: EPA
Factories and stores were shuttered amid vandalism and arson, or feared assaults on staff. Most quickly reopened, but Japanese companies in China then began reporting difficulties with getting their products through customs, and longer waiting times for visas for their staff.
There has been nothing big enough to dam two-way trade — worth US$342.9 billion last year, according to Chinese figures — but the strictures have been enough for Japanese firms to reconsider the cost of doing business with its neighbor.
“No one knows when such demos will happen again in China in the near future,” said Takeshi Takayama, an economist at NLI Research Institute in Tokyo.
Takayama says China, which is no longer a mere production base, is likely to remain Japan’s biggest trading partner for now, as the world’s second largest economy is too big to ignore.
“But I think Japanese companies will shift part of their investment from China to other Asian countries for sure,” Takayama said. “The demos reminded Japanese companies of China risks again.”
Two years ago, a diplomatic row — over the same islands — stymied shipments of rare earths to Japan, hampering the manufacture of high-tech products.
Calm was eventually restored and Japan Inc resumed its huge investment in China, worth US$6.3 billion last year, up 50 percent from the previous year. The US invested US$3.0 billion over the period, down 26 percent, according to official Chinese data.
However, the renewed diplomatic tensions have rung alarm bells.
“We understand why one Japanese business leader after another is expressing wariness about investment in China,” the Yomiuri Shimbun said in an editorial.
“It is highly likely that Japanese companies will sharply curb their investment in China and instead increase investment in other Asian countries,” the mass-circulation daily said.
Analysts say a slowdown in the Chinese economy, as well as a rise in labor costs are practical factors that come into play as part of a rethink that means China is no longer the destination of choice.
The Philippines on Wednesday said it was courting companies stung by the territorial spat, offering tax incentives and promoting a well-educated population, economic stability and a drive to stamp out corruption.
Thailand and Vietnam offer well-worn paths, but rapidly opening-up Myanmar could prove a real investment frontier, commentators say.
“Myanmar is quite a hopeful destination for Japan,” said Yukio Suzuki, chief analyst at Belle Investment Research of Japan, in Tokyo.
“Sentiment toward Japan is not so bad there,” he said.
During years of isolation, Japan — unlike Western allies — maintained trade ties and dialogue with Myanmar, wary that a hard line on the then-ruling junta could push it closer to China.
And Tokyo has moved to capitalize on the thawing in Naypyidaw’s relations with the outside world since decades of outright military rule were ended, announcing in April it would waive about US$3.7 billion of debt.
The Japan Chamber of Commerce and Industry dispatched a large delegation to Myanmar this week to hold talks with local business leaders and high-ranking government officials.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”