Japanese Enterprises in China: Which Way to Go?
Japanese companies have a large presence in China, and China is the top export market for Japanese products. Increasing uneasiness, geopolitical tensions, and China’s economic slowdown have caused many Japanese companies to have second thoughts but the mutually beneficial relationships should be maintained and strengthened.
The recent killing of a ten-year-old boy in Shenzhen in bright daylight has a chilling effect on the Japanese business communities in China. Japan has the largest business presence in China, roughly 30,000 enterprises are operating here, and many are involved in manufacturing, electronics, machinery, chemicals, textiles, and food processing.
In the chemicals and pharmaceutical field, all major Japanese companies have set up their subsidiaries in China, most are located in the eastern and coastal provinces. The presence signals the interdependence between the world’s second and third economies - China is the largest manufacturing power while Japan has a strong foundation in electronics, machinery, and chemicals.
Out of the pharmaceuticals sector, China’s traditional medicines, get a large use in daily lives. From being supplements to relieve over-drinking, to boost energy levels to being over-the-counter or prescription drugs to remedy colds and other symptoms.
China also sees many Japanese drug makers set up operations developing innovative new drug products from inner-digestive medicines to cardiovascular drugs and anti-cancers.
Recent deep collaboration examples include China's major insurer Pingan Insurance and Japan's Tsumura Co. which established a joint venture to develop and commercialize modern TCM, called Kampo in Japan.
Takeda and Shanghai-based Belief Biomed also inked a deal to market gene therapy for hemophilia in China. Others such as Otsuka Pharmaceutical that has seen enormous success marketing its PocariSweet sports drinks in China.
Following PocariSweet’s success, Yuanqi Forest or Genki Forest, a Chinese brand has also quickly grown their sales and revenues growth in China, due to its healthy, sugar-free, and low-calorie drinks.
However, Japanese businesses have encountered challenges recently in the world’s larger consumer?market. One of them is an economic downturn, and consumers’?attitudes and preferences shift, from favoring international brands to domestic brands.?The detention of a Japanese pharma company employee in Beijing on an espionage charge also complicates some business visits.
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?Even Yuanqi Forest 元气森林 changed its branding logo in February 2023 to appear less Japanese. The original logo, which used the Japanese Kanji Genki, was replaced by the Chinese character Qi.
A growing younger generation in both countries seemingly have less favorable views of each other. While the fast depreciation of the Japanese currency means Japan remains a popular destination for Chinese consumers when buying electronics and household goods, the popularity is far less compared to the Baomai（爆买） era.
There are many Chinese who settle in Japan, and similarly, Japanese who choose to settle in China. One of them is?TV director?Takeuchi, who made a documentary on the Yangtze River, recording the changes over the ten years since he made the first documentary for NHK. He and his Chinese wife met in Japan. After they were married and had a son the Japanese father decided to move to Nanjing to raise a family. “I live in Nanjing and see the Yangtze River on the way to work. I also take children to play in the riverbank parks. I’ve developed affection towards the Yangtze River and understanding is deepened by the day”
Such individual exchange has a far-reaching impact on the relationship. The tragedy took place in Shenzhen, in which the family of a Japanese husband and Chinese wife also have lived in the city for many years. The mutual likes and benefits are joint to keep the two countries, businesses, and people together.
The interpersonal link is invaluable in the current rising nationalism. Japanee enterprises may reconsider their presence in China in the aftermath of the Shenzhen tragedy, but, the long-term relationship should remain and be further strengthened, for the benefit of both people.
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