Japanese firms in China are becoming more pessimistic about the world’s second-biggest economy, with about two-thirds saying it’s getting worse and almost half scaling back or halting their investments.
About 64% of Japanese companies said the Chinese economy is faring worse than last year, according to the latest survey from the Japanese Chamber of Commerce and Industry in China.
This is up from 60% in the previous report, and comes as security concerns and the recent stabbing death of a Japanese schoolboy in Shenzhen loom over efforts to improve diplomatic ties.
Japanese firms are heavily invested in China, which remains Tokyo’s largest trading partner. But many companies have been pulling back due to rising geopolitical tensions, deteriorating bilateral ties and stiff competition from Chinese firms.
Meanwhile, Beijing is facing a slowing economy and has introduced stimulus measures since late September in an attempt to boost growth. Despite these efforts, foreign investment continues to decline.
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More than 40% of Japanese firms said they’re not satisfied with business conditions in China, with some companies citing concerns over the safety of their staff and families, China’s refusal to reinstate visa-free travel for Japanese nationals, and the ban on seafood imports as issues they want fixed.
The survey was conducted in the second half of October, with 1,513 companies responding. Of those, 44% said they were planning to cut back on investment in China or not invest at all this year, little changed from the previous survey.
Beijing appears to be trying to ease tensions, agreeing in September to a deal that would pave the way for the lifting of the ban on Japanese seafood imports.
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It also admitted its plane had entered Japanese airspace in August “due to unavoidable circumstances” — according to Japanese media reports on Tuesday — an unprecedented incident that prompted strong condemnation from Tokyo.
China may also resume visa exemptions for Japanese nationals as early as the end of this month, Japanese media reported. This policy has been suspended since 2020 during the Covid-19 pandemic.
Chart: Bloomberg
