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Japanese eco-friendly manufacturers have become optimistic about their business in China as their chairman Xi Jinping promised to achieve carbon neutrality by 2060, but the outlook may not be so bright.
China’s environmental restrictions, as well as a new economic growth strategy called “dual circulation,” designed to boost the country’s domestic demand while trying to increase exports, could pose obstacles for Japanese companies to expand their local operations.
People walk in Beijing’s Tiananmen Square in heavy smog due to severe air pollution on November 14, 2018. (Kyodo) == Kyodo
Xi’s leadership is “seriously eager to address environmental issues, so the Chinese market would appear very attractive to Japanese companies concentrating on green product development,” said a businessman familiar with the situation in Beijing.
“But we have heard that many Japanese companies in China have been struggling to comply with strict government environmental regulations and may lose motivation to continue doing business in the nation,” he said.
In addition, the Communist Party of China has pledged to adhere to the dual circulation strategy aimed at strengthening the international competitiveness of China’s enterprises in the field of cutting-edge technology.
“If Chinese companies can make big strides in the green market with government backing and capitalize on global economic growth in the future, Japanese manufacturers could eventually find themselves in a difficult situation,” he added.
In his speech to the UN General Assembly in September, Xi vowed to cut his nation’s greenhouse gas emissions to zero by 2060, as Beijing has been willing to take the lead in the global climate debate.
For years, China has been stepping up measures to curb air pollution, such as setting strict emission standards and imposing penalties on companies that violate regulations under its determination to “turn the skies blue again.”
In late October, an influential Chinese industry body made up of top auto industry executives and academics said Beijing plans to phase out new gasoline car sales and bring green cars into the mainstream by 2035.
“The announcement bodes well for us as we have a competitive advantage in the green field,” said an employee of a Japanese automaker.
The China Society of Automotive Engineers said that all cars sold in 2035 in the world’s largest auto market and the most populous country would be converted to “new energy” vehicles such as electric or hybrid.
Toyota Motor Corp., Japan’s largest automaker, has said that total hybrid car sales in the world’s second-largest economy have surpassed one million units, as Beijing has promoted green vehicles through subsidies as part of your national strategy.
However, other Japanese companies have complained about China’s environmental policies, saying they are too strict to obey.
According to a survey conducted this year by the Japan Foreign Trade Organization, more than 70 percent of the 233 Japanese companies operating in China said that local regulations are “strict” or “a little strict.”
“The additional equipment to meet the standards becomes stricter year after year and the rising costs have become onerous,” one of the Japanese firms told the government-backed organization.
JETRO said that five of the 233 Japanese manufacturers have already started considering transferring their factories or parts of them to other nations amid growing concern for the future.
Meanwhile, at its key four-day meeting through Thursday, the Communist Party of China decided to defend the dual circulation strategy, as it has argued that the administration of US President Donald Trump has encouraged a “decoupling” in global markets.
The long-term goals to 2035, which were also adopted at the meeting, included commitments to achieve a breakthrough in the field of high technology and improve the modernization of supply chains over the next 15 years.
Under the dual circulation strategy, China is expected to put emphasis on fostering the country’s enterprises by focusing on businesses such as next-generation 5G wireless networks, semiconductors, and biopharmaceuticals.
With tensions escalating between China and the US over various economic and security issues and the outbreak of the new coronavirus stifling both external and domestic demand, China’s economy faced a severe recession in the first quarter of this year.
In recent months, the economy has shown signs of a V-shaped recovery due in part to a rebound in investment and industrial production, but the labor market and economic situation in rural areas have remained sluggish.
Beijing has apparently been forced to make efforts to improve domestic demand as it tries to boost exports of China-made products to its friendly nations, as many market-oriented economies are unwilling to actively trade with the communist-led country.
“China’s ambition to reach carbon neutrality by 2060 can certainly give a boost to Japanese companies in the short term, but the dual circulation strategy would hit them in the medium to long term,” said another businessman in Beijing. .
Related coverage:
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UN chief welcomes Japanese Prime Minister Suga’s zero net emissions pledge
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