Japan's Business Leaders Return to China Strengthening Cooperation Efforts

29 Jan, 2024

Japan's Business Leaders Return to China Strengthening Cooperation Efforts

Ties between Japan and China have become strained after the world's second- and third-largest economies clashed over issues from Japan's release of treated radioactive water into the ocean. An unusually large delegation of about 200 Japanese business leaders arrived in China this week to bolster economic relations in the first such visit in more than four years and in the face of geopolitical headwinds that have strained bilateral ties.

Japanese economic delegations had visited China every year since 1975, but those visits lapsed during the COVID-19 era when China largely shuttered its borders due to its stringent pandemic policies. During their visit this week, the Japanese business delegates, which included Masakazu Tokura, chairman of the powerful Keidanren, as the Japan Business Federation is known, are due to meet with Chinese Premier Li Qiang on Thursday.

Ties between Japan and China have become strained after the world's second- and third-largest economies clashed over issues from Japan's release of treated radioactive water into the ocean to detention of Japanese citizens on suspicion of espionage. Japan's curbs on export of advanced chipmaking equipment to China have also fanned Chinese accusations that Japanese Prime Minister Fumio Kishida's government was following in the United States' footsteps in "containing" China's economic development.

But during a rare meeting between Kishida and Chinese President Xi Jinping in November, both men agreed their countries ought to pursue mutually beneficial relations. China's top diplomat, Wang Yi, has since said the two sides should first establish a "correct mutual understanding" and "make it clear" they are cooperative partners rather than threats to each other.

Japan is heavily reliant on China, where Japanese companies have for years invested in building manufacturing supply chains and forged relationships with local partners. China was both Japan's top export market, at $145 billion, and its single biggest source for imports, at $189 billion, in 2022.

But the number of Japanese firms planning to expand in China fell below 30% for the first time according to an annual survey published late last year, with some firms citing concerns about economic uncertainty and others highlighting geopolitical risks. China last year arrested a Japanese executive, an employee of the drugmaker Astellas Pharma, on suspicion of espionage. The move has had a chilling effect on business, Japanese officials say.

A growing number of Japanese businesses are also grappling with slumping China sales due to rising local competition, China's uncertain economy and negative Japanese sentiment in the wake of the wastewater release from the Fukushima facility. Procter & Gamble said earlier this week sales of its SK-II beauty brand tumbled 34% in Greater China in the December quarter due to "temporary" headwinds for Japanese brands and soft market conditions.