Japanese brands toughing it out in China despite headwinds

Companies see opportunities amid risks, pall over business sentiment

- Walter Sim

At a major annual trade fair in Shanghai earlier in November, Japan had the largest foreign presence among 128 participating countries and regions, with 350 companies out of the more than 3,400 present.

Among them was retailer Muji's parent company Ryohin Keikaku, which was taking part for the first time.

Its president Nobuo Domae said: "I hope the door to China's economic liberalisation will open up even more."

The overt display of optimism notwithstanding, worsening bilateral ties, uncertainties in Chinese domestic policy, and an ailing Chinese economy have cast a pall over business sentiment even as Beijing insists that it welcomes foreign investment with open arms.

Companies such as musical instrument maker Yamaha, cosmetics brand Shiseido, and Muji have in recent months suffered from the changing winds in China.

But few Japanese companies would slam the door shut on Asia's largest economy and its vast consumer market, whose population of 1.41 billion is 10 times that of Japan.

Nevertheless, there is growing trepidation about over-relying on a country whose governance is perceived as erratic and opaque.

Japanese Prime Minister Fumio Kishida and Chinese President Xi Jinping met in San Francisco for the first time in a year on Nov 16, on the sidelines of the Asia-Pacific Economic Cooperation Summit.

During their meeting, they made the right noises about building a "stable and constructive" win-win relationship as neighbours, with Mr Xi saying the two countries should "properly handle differences".

Yet, Japanese foreign direct investment into China has been shrinking, as has the number of Japanese citizens living there.

The abrupt detention of an Astellas Pharma employee in March 2023 has severely chilled sentiment. The man in his 50s was formally arrested in October.