Island spat dulls appeal of China as production base for Japan firms: survey

TOKYO Wed Dec 4, 2013 3:57am EST

A man walks on a pathway next to a building in Tokyo's business district September 30, 2013. REUTERS/Yuya Shino

A man walks on a pathway next to a building in Tokyo's business district September 30, 2013.

Credit: Reuters/Yuya Shino

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TOKYO (Reuters) - A territorial dispute and rising labor costs have dulled the appeal of China as a production base for Japanese manufacturers, with Indonesia, India and Thailand more attractive, an annual survey by the Japan Bank of International Cooperation showed Wednesday.

China dropped to fourth place in a survey it has topped since it began in 1992, with the proportion of companies naming it the most promising region over the next three years falling to 37.5 percent from 62.1 percent last year.

State-owned JBIC, which provides loans to help Japanese companies expand overseas, in July-September surveyed 625 firms which have three or more overseas affiliates, including at least one production base outside of Japan.

Sino-Japanese relations have worsened since the survey after China established an air defense zone in the East China Sea covering islands controlled by Japan but claimed by China.

Most companies in the survey, 77 percent, cited rising labor costs as a concern for manufacturing operations in China. Almost a third said they were also worried about security and social instability there.

A consumer boycott of Japanese goods in China following anti-Japanese riots last year hurt income from Asia's largest economy, making China a less profitable source of income than India and Europe, JBIC said.

(Reporting by Tim Kelly; Editing by Shinichi Saoshiro and Christopher Cushing)

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Comments (3)
WJL wrote:
Both Japan and USA depend upon the China market to revive their economy.

It depends upon whether these nations are rational and go for a win-win situation rather a lose-lose situation.

Dec 04, 2013 4:11am EST  --  Report as abuse
JSCD wrote:
Japan will be the loser in this, since it has more to lose than China. Japan will find quickly that countries like India and Indonesia do not offer the same work ethic or infrastructure as China.

Dec 04, 2013 9:02am EST  --  Report as abuse
shiba-ken wrote:
JSCD … You are correct that many other countries do not have the same infrastructure as China does, but I do not agree with your conclusion about the comparative work ethic between China with India and Indonesia. There are many products that are from these countries, if not the same quality as China but with lower operating costs…Japan is already relocating many of there industries at this moment, as with many other countries including the U.S.
Can you explain explain WHY there is mass exodus of foreign capital investment and companies exiting China at this moment?

Dec 04, 2013 10:21pm EST  --  Report as abuse
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