Masao Nishino is in charge of China operations for Asahi Breweries. “China consumes 50 million kilolitres a year, more than twice as much as the U.S. and 10 times more than Japan.” He aims for the high-end segment at 10 yuan (US$1.62) for a large bottle. “We went for Japanese restaurants initially and now have expanded into Korean and Western ones and bars serving fresh beer.”
Asahi Breweries is one of hundreds of Japanese firms selling consumer goods to the giant Chinese market that have suffered from the two-year deterioration in relations between the two countries since 2012 under the government of Shinzo Abe.
Exports to China fell by 10.2 per cent last year from 2012 to US$129.883 billion, the second straight year of a double-digit decline. Among the worst-hit items were cars, whose exports fell 11.6 per cent, compared with a fall of 42.8 per cent in 2012, when they were the target of well-publicized demonstrations.
Japanese business is paying a heavy price for Abe’s foreign policy; initially, it was the dispute over ownership of the Diaoyu/Senkaku islands but it has since spread to the South China Sea, with his strong support for Vietnam and the Philippines in their conflict over islands there.
Big business has been one of the pillars of the Liberal Democratic Party, which has ruled Japan for all but four years since 1945. The party followed a low-key foreign policy and a line of no military involvement overseas that perfectly matched the aims of the big companies; they were able to export to countries around the world and then invest in and lend to them.
But Abe’s policies have upset two of Japan’s biggest economic partners — South Korea and China. Bilateral trade with China last year was US$311.995 billion, accounting for 20 per cent of its total trade and three times the bilateral amount in 2000.
“Improving relations with China and South Korea is one of the priorities of Keidanren,” Sadayuki Sakakibara, the chairman of the most important business association in Japan said Monday, the day before he took office.
On May 28, his predecessor Hiromasa Yonekura met Vice President Li Yuanchao in Beijing to discuss how to improve their economic ties.
In the first four months of the year, Japanese investment in China fell 46.8 per cent to US$1.6 billion. Last year Japan invested US$22.8 billion in Singapore, Thailand, Indonesia, Malaysia, the Philippines and Vietnam, compared with US$7.06 billion in China.
In Tokyo as in Beijing, there are different constituencies. The militaries of the two countries are encouraging the confrontation. In Tokyo, big business is dismayed, as are the ministries that support them. One is the Ministry of Finance; one of its officials outlined the arguments in an interview with the Beijing-based Economic Observer published on May 19.
“In 2013, Japan had 10.36 million foreign visitors, exceeding 10 million for the first time and up 24 per cent on 2012. They spent 416.7 billion yen (US$4 billion). Of that figure 983,300 came from China. In the first quarter of this year, 478,200 Chinese came, an increase of 87.2 per cent. To cities and rural areas in Japan in decline, attracting Chinese visitors has become a matter of life or death,” the official said.
“Nissan’s domestic output of automobiles this year will fall below one million, the lowest figure since the 1960s. But its overseas production last year reached a record four million. Its largest overseas market for production and sales is in China.”
The official said that in 2010 China became the country holding the largest amount of Japanese government debt. By 2014, this figure has grown to the equivalent of US$195.8 billion, far exceeding that of any other creditor. In addition, 180 Japanese listed companies have companies linked to the Chinese state among their top 10 shareholders. “China has become a pillar of the Japanese economy.” he said.
Today is the 25th anniversary of the military crackdown in Beijing against student-led protestors. The Nihon Keizai Shimbun, Japan’s largest business newspaper, reflected on the future of the country’s biggest trading partner.
In an editorial, it said that, since the crackdown, the Communist Party has followed a policy of intense nationalism. “To re-evaluate what happened on June 4 is the first step toward making a more stable world and a better life for its people. Unfortunately, this will not happen under the government of Xi Jinping. In fact, it is the reverse. There is little possibility of a change by this government that rules by harsh and heavy-handed measures. In the economy, there will be risk in China.”
The writer is a Hong Kong-based journalist and author.
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