Japanese Companies Shift Production as China’s Economic Slowdown Persists
Caution Persists Despite Signs of Recovery
Most Japanese companies anticipate a prolonged slowdown in China’s economy, with nearly two-thirds of firms planning to shift some production to other markets, according to a monthly poll by Reuters. Although recent data indicates signs of recovery, with China’s factory activity expanding and sales growth accelerating, 52% of the 502 major Japanese companies surveyed expect the slowdown in China to continue until 2025. Only 5% anticipate a rebound by the end of the first quarter next year.
Challenges in Cargo Shipments
The stagnant cargo shipments are posing challenges for transport companies as they struggle to tackle the slowdown. A representative from a transport company stated that it has become difficult for cargo handlers to address the situation.
Factors Affecting China’s Economy
China’s economic slowdown is influenced by various factors, including infrastructure project debt and a downturn in property values. More than two-thirds of household wealth in China is tied up in the property market, leading to hesitancy among consumers and companies to spend. The rise in youth unemployment exacerbates the situation.
Concerns for Japanese Companies
As China is Japan’s largest trading partner, the slowdown is having a significant impact on Japanese companies. Among the firms surveyed, 45% reported that their businesses have been affected by the slowdown. As a result, 17% of companies predict weaker economic growth until the end of 2024 and are considering shifting production out of China. Additionally, 12% are reducing capital investment in the country.
Call for Economic Stimulus
In Japan, 86% of the companies surveyed are urging Prime Minister Fumio Kishida to implement a stimulus package worth over 10 trillion yen ($294 billion) to boost the economy. Some companies are even advocating for a spending package of at least 30 trillion yen, which includes measures to address price rises and support companies in raising wages.
Positive Outlook for China’s Growth
Despite the cautious sentiment among Japanese companies, analysts predict that China’s economy will grow by 5% this year and 4.5% next year. While the road to recovery may be challenging, the signs of growth provide hope for the future.
The Reuters Corporate Survey, conducted between September 27 and October 6, polled 502 major non-financial Japanese firms. The respondents were guaranteed anonymity to encourage open and honest responses.
