Report: 91% of Japanese companies in China will maintain their current scale or increase investment within 3 to 5 years

　　Report: 91% of Japanese companies in China will maintain their current scale or increase investment within 3 to 5 years

　　In the post-epidemic era, how do Japanese companies in China view the development of the Chinese market?

　　Recently, PricewaterhouseCoopers released the "2021 Research Report on the Development of Japanese Enterprises in China" (hereinafter referred to as the "Report"),

　　According to Takahashi Takahashi, market leader of PwC's China and Hong Kong business in Japan, despite the significant impact of the new crown epidemic on global economic and trade activities, Sino-Japanese trade has remained stable, which is enough to show the strength of Sino-Japanese economic and trade relations. Foundation and resilience.

　　He told Yicai.com that the vast majority of Japanese companies in China maintain or expand the scale of production and operations in China, indicating that the fundamentals of Sino-Japanese economic cooperation have not changed, and there is even the possibility of continued improvement and expansion.

He said: "At the same time, it must be recognized that with the sharp rise in China's land and other resources and labor costs, the development of Japanese companies in China will encounter new bottlenecks. However, with the further improvement of China's business environment and the With the further release of the advantages of policy stability, it is believed that more Japanese companies in China will fully enjoy the institutional dividends of China's economic development, and they will have sufficient confidence and expectations for further expansion of investment and production in China."

　　The survey, conducted in the second half of last year, involved 200 Japanese companies in China in more than 20 industries including machinery and electronic equipment, automobiles, marine and aviation components, chemicals, retail, financial industries, and IT.

Nearly 90% of Japanese companies in China value China's huge consumer market the most

　　According to data from the Ministry of Commerce, in 2020, the total trade volume between China and Japan was US$317.53 billion, an increase of 0.8% over the previous year.

In the first half of 2021, the total trade volume between China and Japan was US$181.29 billion, an increase of 23.7% over the previous year.

China has been Japan's largest trading partner in recent years, and Japan is China's fourth largest trading partner after ASEAN, the European Union and the United States.

　　The report pointed out that the number of Japanese companies in China has remained basically stable in the past five years.

　　In terms of business environment, Japanese companies are generally satisfied with their treatment and business environment in China.

The report shows that 65% of the companies surveyed believe that they enjoy the same or better treatment as domestic companies.

For the Japanese companies interviewed, the most important thing for their development in China is the huge consumer market in China, with this proportion reaching as high as 87%.

The integrity of the industrial chain, supporting measures for new business development, logistics convenience and financial subsidies are the top four important factors that Japanese companies will consider when expanding their investment in China in the future.

Low labor costs are no longer the primary factor for Japanese companies to develop in China, and only 21% of the surveyed companies agree with this.

　　In this regard, Wang Kai, deputy director of PwC's China Corporate Finance and M&A Department, explained that this shows that Japanese companies have shifted from relying solely on China's cheap labor and tax incentives, using China as a production base, and turning to targeting the Chinese market.

　　The report pointed out that the development of Japanese companies in China mainly faces four major challenges: organization and human resources, automation, ESG compliance, and network security.

　　In this regard, Huang Yaohe, PwC's Global Cross-Border Services China Leader, told Yicai.com that from the current business trend insights, some Japanese companies are starting to reform China's business system, such as independent operation of a single function according to business modules. Integrating several outlets of the company to form a main body with more cost competitive advantages and economies of scale; at the same time, through capital cooperation such as mergers and acquisitions with domestic enterprises, synergies such as localization of senior management and supply chain optimization are realized.

　　Regarding the future, Huang Yaohe believes: "2022 will coincide with the 50th anniversary of the normalization of Sino-Japanese diplomatic relations. In the past 50 years, with the accelerating pace of Chinese enterprises' 'going out', Chinese enterprises have become more and more interested in Japanese cross-border e-commerce, mobile payment, etc. , The investment in the sharing economy is on the rise. At present, both China and Japan are accelerating the digital transformation, and the digital economy will become an important area of ​​Sino-Japanese cooperation in the future. In the future, China and Japan will have a closer cooperation."

How will RCEP affect?

　　At the same time, the report pointed out that the epidemic, the implementation and revision of foreign investment security review, and the Regional Comprehensive Economic Partnership (RCEP) are all macro factors that Japanese companies pay more attention to in their development in China.

　　The RCEP that came into effect on January 1 enabled China and Japan to reach a bilateral tariff reduction arrangement for the first time, achieving a historic breakthrough.

According to data from the Ministry of Commerce, the ratio of zero tariffs between China and Japan will reach 25% and 57% respectively.

In the end, 86% of Japan's products exported to China will achieve zero-tariff treatment, while 88% of China's products exported to Japan will enjoy zero-tariff treatment.

　　The interviewed Japanese companies believe that

　　In this regard, Li Zicong, PwC China International Tax Partner, told Yicai that many Japanese companies still wait and see the effect of RCEP, but it should be noted that with this platform, Japanese companies in China faced difficulties It is a market of 1.4 billion people, and then their factories in China will face the market of all RCEP member countries with a population of 2.26 billion, so I believe that the entry into force of RCEP may have significant implications for the domestic production layout of Japanese companies.

　　Regarding the issue of supply chain transfer of Japanese companies that has attracted much attention before, Li Zicong believes that the relocation of the Japanese manufacturing sector to Southeast Asian countries can be traced back to four or five years ago. At that time, most Japanese companies already had a "China + 1" strategy. Migrate some relatively low-end production lines to Southeast Asian countries to take advantage of local low-cost labor.

"But in fact, over the years, the relocated Japanese companies have had mixed success in the local development of Southeast Asia." He gave an example, some Japanese companies found that the technical skills of local employees in Southeast Asia were not as good as those in China.

　　He went on to say: "So when looking at the so-called production cost, we must not look at the absolute production cost, but at the actual output brought by local employees. For example, the production cost of enterprises in Vietnam may be 1/3 of the domestic production cost. At present, China's production cost The labor force may have an advantage of eight times that of the Vietnamese labor force in terms of output, so the actual cost of adjusting the supply chain of enterprises to Southeast Asia is not necessarily really low.”

　　Chen Youjun, a professor at the Shanghai Institute of International Studies, told Yicai that the process of RCEP has not been easy, and its entry into force shows the determination and motivation of all countries in East Asia to promote regional economic integration in the future, which will help drive the development of regional economic integration in the region. Trade flows and increases cooperation.

　　Of course, he emphasized that the epidemic has become an important consideration for many companies in the process of transferring production or restructuring the industrial chain.

"In fact, under the epidemic, the data for Japanese companies to transfer supply chains or restructure their supply chains fluctuated greatly and changed with time and the epidemic. Therefore, it takes time to verify the real effect of RCEP." He said.