business

As China tensions simmer, Japan pulls back from 'world's factory'

27 Comments
By James Topham and Izumi Nakagawa

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© (c) Copyright Thomson Reuters 2012.

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27 Comments
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A logical outcome following the scenes out of China last month. Ishihara should be made to assist with the relocation costs.

-1 ( +6 / -7 )

Soon China will meet its own demise. Increasing inflation, rising currency, rising labor cost and a bubble. Time for companies and investors to rethink.

7 ( +8 / -1 )

Everyone seems to be absolutely set on going to China, but that is something I don't quite get. If everyone is going to China, doesn't that mean that other opportunities will arise in other countries? Yes, I know China is the biggest market, but many other countries have large populations with a more friendly business environment.

2 ( +3 / -1 )

You'd have to be either a foolhardy optimist or just plain crazy to invest in a country that uses mob riots against your factories or stores as an instrument of its foreign policy. Furthermore China's economic growth statistics are only impressive when one disregards the fact that there was no growth at all, or negative growth, in the 40 years between 1949 and 1989.

2 ( +3 / -1 )

The worker in southeast asia is very different from those in China.. If you have stayed in South East Asia for years that you know what I'm talking about... The Chinese worker can work 12 hour a day for money... South East Asia people have very different mind set.. As long as they can eat, thats enough.. And if they have extra money, they will quit and go back to home town untill their money run out then they come back to city and seek new job.. I own factory in Indonesia and I have to deal with replacing worker all the time..

Those apparel company is easy to replace those worker whose only job to sew your jean whole day... But making car is totally different breed of worker... You need proffesional for that kind of job and if they quit, where are you gonna find quick replacement for that??

The CHinese government is not idiot and they know they cannot rely on export.. CHina has one big advantage and is her population.. She can turn in ward and still maintain good balance in her economy...

1 ( +3 / -2 )

Apparently all eyes seem to be shifting to Myanmar as is evident in the high media coverage nowadays. Situation in China seems to have helped a great deal in gold coating what is already a brilliant opportunity for Myanmar as it transitions into democracy.

0 ( +0 / -0 )

I hope the reader in this forum is smart enough to know alot of the problem between Japan and China is political strategies... Like Japan, right before Senkaku issue, you see alot demonstration about Fukushima Nuclear plant... Then Ishihara trigger the senkaku issue and fukushima demo just suddenly vanished! They know what the Chinese reaction will be if they heat up senkaku issue... Now they have little room to breather and think about what they should do with Fukushima while all Japanese eyes is on China.... This happen all the time in any countries..

0 ( +2 / -2 )

Come back to the Philippines, we too have a burgeoning population willing to spend on technologies direct from Japan. We're tired being bullied by China.

4 ( +5 / -1 )

Come back to the Philippines, we too have a burgeoning population willing to spend on technologies direct from Japan.

In order to spend, you've got to have the money in the first place.

3 ( +3 / -0 )

I said it many times before even before the strikes took place. If China goes ahead and acts up, strikes and make a mess with Japanese businesses, they will only be hurting themselves. And now here it is... the outcome is coming to light and Korea and Japan are starting to look at Philippines, Myanmar, Thailand and Vietnam for business. That's a great thing and I hope these countries will not rise up like China did.

1 ( +1 / -0 )

alliswellinjapanOct. 25, 2012 - 09:39AM JST

Apparently all eyes seem to be shifting to Myanmar as is evident in the high media coverage nowadays. Situation in China seems to have helped a great deal in gold coating what is already a brilliant opportunity for Myanmar as it transitions into democracy.

Back in 1986-87, I have worked in Yagon International project which was funded by Japan through OECD. While I was working in that project, I noticed that Myanmar Miltary officials were so corrupted. They demaded every luxury car for each official and they controlled every aspect of funding for project. Due to 1988 polictical crisis, that project did not go ahead by Japanese contractor know as Taisei co-opeation. Majority of funding for project were mysteriously disppeared.

Myanmar is another Greece who has never fufillied their debt obligation. In this year, Greece is the birth place of democracy. Myamar is the baby of democracy. Japan wrote off the soft loan 303.5 billion yen ( $3.72 billion) debt to Myanmar. There are other countless debt Myanmar never have to repay. Japan is the money machine for corrpupted Myanmar authority. The strategy of J politicians is want to get easier assess for market and exploration of natural resources. It is against with the reality of that nation.

South Korea and PRC have well established in Myamar for many decades. Samsung is the conquerer of Myanmar market. Chinese bicycles, sewing machines and hardware are dominating the market. Famed Myanmar Teak tree are not many left in Myanmar due to unregulated logging. Doubfully they will still have off shore natural gas and oil reserve.

Myamar and Phillipines market are not large enough for making money. Their population and purchasing power are nowhere near to the fraction of PRC.

According http://www.japantoday.com/category/commentary/view/africa-the-next-economic-tiger, Africa is more promising for J co-operation. South Africa like China have a large pool of skilled talent .

3 ( +3 / -0 )

The main problem here again and again is production does not makes money but it's the market that brings in wealth.

No market means no money to be made means no production.

China knows this very well that they cannot stay the same in order to transform from a "Made in China" to a "Create in China" approach for its economy in the near future which is why for the next 5 years domestic development is a must for them to become a soft power.

It's not just Japan but other countries as well but that's for production and for China's huge market the money is there for a very long period of time before other market emerges. It would definitely be good for SEA countries but for Japan only time can tell whether their investments would return their expected favor or not.

1 ( +1 / -0 )

Nathaw: Thanks for the valuable info. Was speaking more from Myanmar's standpoint as Japan shifts into full gear there (in comparison with the current situation with China). Agree Myanmar has its own challenges and a far smaller market than China to start with. Assume Japan's initial interests to be primarily social infrastructure or plant export related. Difficult to deny the investment booming there nonetheless, which is not unique to Japan inc but pretty much everyone else.

0 ( +0 / -0 )

Japanese product is competitive. But you should know your core competence. Manufacturing in China could be one of them. If moving out of China could increase your competence, let it be. As a Chinese in mainland, I think Chinese are hard-working people. J-company has already got a lot of profits from it. If J-company want to move out of China, we don't care, Chinese and other countries will have enough capital to fill the gap. A hard-working nation will not starve. Actually, the issue here is not whether you keep your plant in China or not , but "do you want Chinese market ?" J-brand products are affected by this tense relation between China and Japan.

-3 ( +0 / -3 )

China is hurting itself...................the economy is slowing in China and J companies pulling out will slow Chian down more.

0 ( +3 / -3 )

If money is not an issue then time is for Companies that want to move out of China and invest into other countries in their production lines. Firstly manpower, an educated labour force,ethics, and government incentives are the core requirements. China has met these and is a large market and closed to their market place.

Don't forget that even though China is a Communist Country, it has improved over time compared to 30-40 years ago. Bear in mind their population is more then a billion and it is not easy to govern a country of this magnitude with many ethnic groups. It 's middle class is increasing and this is where the big market is.

Japanese CEOs knows that getting out of China and move to other countries only make sense if the dispute worsen to an irretrievable state and major conflict occurred other then that they would stay put until this hot wind brew over.

0 ( +0 / -0 )

Japan should have left the PRC 5 years ago, but cheap unskilled labor has kept them there.

Now they see that they (and no other nation really) cannot do business in that uncivilized backwoods of a nation.

Time to move to a more stable location one where workers do not act like animals.

-1 ( +2 / -3 )

Tai-Cheng LeeOct. 25, 2012 - 12:53PM JST If J-company want to move out of China, we don't care,

Oh you'll care, you'll care when your unemployment starts to rise even higher and the people do not have outside money.

Remember when one leaves others follow, believe it or not a trend is forming and it's called companies not wanting to invest in the PRC.

Becareful with what you wish for.

1 ( +4 / -3 )

If Japanese companies do consider pulling out,where is the logical sense ?. If you deny the Chinese jobs by removing your company, that only increases the anti japanese sentiment . It would be like a complete boycott of Japanese goods. Japanese companies are already in place in India and South America, but the Chinese market is huge,and close, by moving to another country doesn't guarantee you access to that market. Japan is feeling the economical pain already , thanks to political blundering, can you imagine the true cost if the Japanese pulled out.

-3 ( +0 / -3 )

@ JoeBigs I really don't care . I don't care the unemployment rate. I don't care J-company leave or not. What I wish for China is it can keep reforming its economy and politics. The officer and state-owned company here has acquired a huge mount of money. It is unfair for the common people. There is a saying in China " crisis is also an opportunity" . China need crisis so some changes could be made. I believe if all the J-company leave China , Japan will suffer more. And it will be difficult for them to come back , since the market will be occupied by others.

0 ( +1 / -1 )

you know, i never paid a lot of attention to the situations in asia until last year so i dont know the depth of it but the more i read about this single incident the more i am convinced this is just a very convenient excuse, one both parties were waiting for and the underlying problems are way deeper and go way further back than some fishing grounds

0 ( +0 / -0 )

@ JoeBigs "Remember when one leaves others follow, believe it or not a trend is forming and it's called companies not wanting to invest in the PRC."

China overtook the U.S. as the world's top destination for foreign direct investment in the first half of 2012, according to the United Nations Conference on Trade and Development (UNCTAD).

http://www.cnbc.com/id/49546296/China_Surpasses_US_as_Top_Foreign_Investment_Venue

Your perception is not reality

0 ( +0 / -0 )

Jay HoffmanOct. 26, 2012 - 12:37AM JST China overtook the U.S. as the world's top destination for foreign direct investment in the first half of 2012, according to the United Nations Conference on Trade and Development (UNCTAD).Your perception is not reality

My reality is what the future holds for the PRC.

-1 ( +0 / -1 )

Tai-Cheng LeeOct. 25, 2012 - 04:39PM JST @ JoeBigs I really don't care . I don't care the unemployment rate.

That statement alone shows how little you actually know about history.

You should take a trip outside of your country and then go to a real public library that is not censored by the PRC. You will be surprised as to what happend to nations with huge unemployment.

BTW have you read how much money your Primier is hording and how he garnered it? If you don't do not worry, it's because your government is censoring the truth on that also.

-1 ( +0 / -1 )

what will gradually happen is that China will become a factory for China only. Japanese companies will not totally leave China but most of the products to be sold outside China will be manufactured in SE-Asia or elsewhere.

Nissan will build an additional factory in Thailand, as reported by Nikkei a few days ago, which when become operational, will have a yearly output of 400,000 additional cars. Almost all of those additional 400,000 will be sold outside Thailand.

0 ( +0 / -0 )

Relocation of plants will bear high costs in economic downturns -- mostly importantly, the opportunity cost of being close to the market ( for some industries )

0 ( +0 / -0 )

@JoeBigs From your comments, I can see that you have very biased mind.. Your images about China probably is 30 years ago..

you may think I want China to be stable. Well , it is hard to say. sometimes temporary misery is good for long term profits.China's economy has become the No 2 in the world. But the economic quality is still not very good. Due to some reason, the advanced countries set a lot of export limits on China. So It is very difficult for China to learn high technology or buy companies from advanced countries. Since the market share is occupied by foreign countries, it is difficult for Chinese companies to invonate too.I don't think China want to be a world factory for a long time. Time to change. We need more research centers , not factories. But if China want to be a world factory, China undoubtedly can get a lot of capital from the world.

For the politics, in my opinion, China need some crisis. The dictatorship is not a stable state (Actually, China is controlled by several people, not by a dictator). Japan could be the right one to pick. Currently, Japan is used by the communist to diverse crisis and earn more support from people. But if the crisis is becoming worse, let's say, the Japanese coast guard collide with Chinese surveillance ship, to save face, China may have to send naval ships to that region. Japan send the ships too. Nobody knows what will happen. . There is huge opportunity in this crisis, especially for the politics in China. Since in the long run , China will definitely be a more powerful country, hurting China too much definitely is not good for Japan's long-term interests. And Japan cannot get a bulk from it. I believe that Japan want to be a big country,at least in the past. But you have already lost your chance.The right-wing cannot make any difference , but only cause troubles. And it is going to hurt Japan. And the Japanese who support the right-wing may not know it is them who are going to suffer, not the right-wings.The right-wings like Ishihara can earn reputation, probably money too. They are clever . Because they mind their own business. To most of us, we get nothing from it. The only profit we can get is probably we can exercise our critical thinkings. That is it.

0 ( +0 / -0 )

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