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Five large Japanese companies said they would continue to produce in China because this is a very important market and that factories in China at this time would be extremely expensive and cause unnecessary disruption. set.
“Toyota has no plans to change its strategy in China or Asia due to the current situation,” the Japanese automaker said in a statement. “The automotive industry uses so many suppliers and operates in a broad supply chain, which is difficult to adjust immediately. We understand the government’s point of view, but we have no plans to change production, “said Toyota.
Building materials and household goods supplier Lixil Corporation also said it has no plans to take production out of China. “We operate in a flexible global supply chain, with more than 100 manufacturing facilities worldwide. This flexible and fully integrated structure allows us to penetrate some of the effects of the COVID-19 pandemic, ”said Lixil.
Another Japanese manufacturer (unwilling to name it) said it will continue to produce in China because “the products are designed to be sold to the Chinese,” so there would be no intention of moving to a different location. It means a lot in business terms.
In a major record-setting stimulus package set up to remedy the aftermath of COVID-19, the Japanese government spends 220 billion yen ($ 2 billion) to support companies that want to bring production to Japan or reduce it. Southeast Asia.
This step was taken after automotive companies and other manufacturers lacked equipment and components imported from China due to production disruption due to COVID-19. Components and equipment made by Chinese partners or branches of Japanese companies in China are used to manufacture motors, electrical systems, furniture and plastic parts in the automotive industry. bowl. In addition to exporting to Japan, these products are also used for automobile factories in China.
But a shortage of supplies is not the only concern for Japanese companies in China. They are also concerned about the risk of paying more taxes due to the trade war between the United States and China. There is also the problem of rising labor costs and the possibility of increasing anti-Japanese ideology in Chinese public opinion as previously appeared.
Another concern is the theft of intellectual property rights from Japanese companies, while some governments worry that cooperating with Chinese companies may threaten national security.
But many analysts say Japanese companies still see many reasons to stay in China.
“Those companies will be very cautious about what they say, whether or not they want to move. They want to maintain a good relationship with the Chinese government, “said Ivan Tselichtchev, a professor at the Niigata University of Administration.
Whether they have financial support from the Japanese government, moving production to a new facility or country will certainly be costly, not just because of the cost of compensation for employees and business partners if the company decides to do so. outside of China, said Mr. Tselichtchev.
Furthermore, the related paperwork will be time consuming and costly, while Chinese officials will step in to complicate the process, Tselichtchev said.
“Companies don’t want to talk about sensitive issues like this because it could lead to Chinese retaliation. But China remains a market for 1.3 billion people, has the fastest growing economy in the world after the world emerged from the coronavirus crisis, and Japanese companies will not want to do anything that makes it difficult for them to stay. in this market, “said Jun Okumura, an analyst at the Meiji Global Institute in Japan.
Okumana believes that the biggest change after the pandemic will be that more companies prepare to be more flexible in disaster situations, such as building more production facilities in Southeast Asia.
Japanese companies have production facilities in 10 countries in Southeast Asia, including Thailand, Indonesia, and Vietnam.
In 2017, these companies invested $ 22 billion in Southeast Asia, including auto companies that focus on Thailand and Indonesia, machinery companies, and retailers that focus on Vietnam and Malaysia. Philippine-focused chemical, pharmaceutical and semiconductor equipment manufacturer
Mr. Tselichtchev said the supply diversification process has started in some industries, mainly due to rising labor costs, but he did not expect a “large-scale migration” from China. National due to the impact of the Japanese government’s support package.
Okumura agrees. “I am not sure how effective the efforts of the Japanese government will be. This pandemic affects the entire world, so it is not simply a matter of closing a store in China to move to another place, ”he said.
according to SCMP
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