Osaka - Sunday, December 11, 2011
Nikkei, Japanese leading newspaper specialized in business and economy, reported today that Japan, China and South Korea are to start negotiation to conclude a FTA (Free Trade Agreement) in summer 2012. The three countries plan to define the direction of the negotiation start kickoff in the joint study about FTA among the three countries next week, and to officially confirm in the summit among the three countries to be held in spring 2012.
They also plan to reach a substantive agreement on Investment Agreement including such topics as preservation of intellectual properties.
1. Why Japan decided to start the negotiation now?
In November Japan expressed its intention of joining the negotiation to become a member of TPP. According to the analysis of the Japanese government, China and South Korea have become more proactive in negotiating with Japan about the topic in this trend and thus would like to take the opportunity to move forward on the FTA negotiation with the two countries.
2. How will the FTA negotiation proceed?
The 7th meeting of joint study among industry, academia and public sector to discuss conclusion of FTA among the three countries will be held in Pyeongchang December 14 – 16. It is anticipated that in the report to be announced on the last day a proposal to start the negotiation soon will be included, in addition to stance of each country regarding liberalization of trade and investment.
After the announcement of the report, governments of the three countries are to start drafting organization and schedule of the negotiation on the practical level. It is planned that in spring 2012 the official agreement discussion of the FTA is to be included in the summit agenda participated by the three countries to be held in China. The three countries aim to start the negotiation in summer 2012 to reach an agreement and sign smoothly and quickly.
3. What would be the focus of the negotiation?
It would be whether how cooperative the three countries can be to reach an agreement.
Japan would like to promote region scale economic alliance in Asia Pacific through Investment Agreement and FTA. China is rather reactive in lowering tariff of industrial products because they feel it would be a negative factor in developing the industry of their country.
In such a situation, it will not be easy for the three countries to reach an agreement. There are many hurdles to overcome regarding conditions even after the FTA negotiation started among the three countries.
4. What is the additional discussion planned between Japan and South Korea?
The Japanese government will also proceed simultaneously with negotiation to liberalize bi-lateral FTA with South Korea. The government started to coordinate to re-start in the first half of 2012 the negotiation of EPA (Economic Partnership Agreement) between Japan and South Korea that has been halted since 2004. This topic is planned to be included in the agenda of the meeting between Prime Minister Noda of Japan and President Lee Myung-bak of the Republic of Korea when the President visits Japan on December 17.
5. What is the plan of the Investment Agreement among the three countries?
It is anticipated that the substantive agreement is reached regarding the Investment Agreement among the three countries to deregulate investment from foreign capitals in the 14th meeting to be held on December 14. And then the leaders of the three countries are to sign the agreement in spring 2012 to make it effective by the end of 2012.
In the Investment Agreement, topics such as rules for intellectual property preservation and dispute settlement based on the International Law will be included. The agreement also aims to loosen the regulation of local content and technology transfer.
Resources:-
Japan, China and South Korea are to start negotiation to conclude FTA in summer 2012. The three countries plan to define the direction of the negotiation start in the joint study about FTA among the three countries next week, and to officially confirm in the summit among the three countries to be held in spring 2012. They also want to reach a substantive Investment Agreement including such topics as intellectual properties preservation.
2011年12月11日日曜日
2011年7月31日日曜日
Increasing Chinese Companies Acquiring Japanese Companies – How and Why?
Osaka - Sunday, July 31, 2011
Nikkei, Japan’s leading newspaper specialized in business and economy, reported on July 29 that more Chinese companies have been acquiring Japanese companies, taking the opportunity of reporting the announcement made by Panasonic on July 28 that refrigerator and washing machine business originally of Sanyo is to be sold to Haier, a leading Chinese consumer electronics company.
1. What is the acquisition by Haier of Panasonic’s business all about?
1) What is the overview of the acquisition?
On July 28, Sanyo reached a basic agreement with Haier to transfer stocks of 9 companies of refrigerator and washing machine business including Sanyo Aqua by the end of the year. Sanyo will also transfer home appliance businesses including air conditioners for 4 South East Asia countries including Vietnam, allowing the use of “Sanyo” brand for a few years.
The business size of the business to be acquired by Haier is approximately 70 billion yen (for 2010), engaged by 2,300 employees worldwide. The acquisition cost is not revealed but experts estimate that it is around 10 billion yen. Panasonic (Sanyo) and Haier are to reach the final agreement by the end of September.
2) Why Haier decided to acquire Sanyo’s refrigerator and washing machine business?
It is to develop high value products leveraging leading edge technologies of washing machines and refrigerators that Sanyo poses. In this way, Haier will be able to meet the needs of drastically increasing middle class in emerging countries and accelerate globalization of their businesses. Such technologies include washing clothes without water using Sanyo’s washing machines and minimizing noise during operation of Sanyo’s washing machines and refrigerators.
Haier started to globalize their business from the end of 1990s and has been expanding sales channels in the U.S., the Middle East etc. The company also had established development sites outside China to launch products meeting local needs. In addition, the company had been manufacturing locally to improve cost competitiveness to grow their business.
Today, their 1/4 of the worldwide business (1,640 billion yen in 2010) is generated from production and sales outside China. The company’s vision is to become the worldwide leader in home appliances, with their business generated from production and sales outside China reaching 1/3 of their worldwide sales.
With the acquisition, the company will be able to obtain sales/distribution channel in Japan and in some major South East Asia, a great “weapon” to achieve their vision. Sanyo had spent 40 years establishing production sites and sales channels and penetrating their brand in South East Asia. That is why recently Sanyo has been enjoying market share of 30% in washing machine and refrigerator business in Vietnam and 10% in Indonesia. In fact, 1,600 employees out of 2,300 employees that have been engaged in the businesses acquired by Haier are in Vietnam and Indonesia.
3) Why Panasonic decided to sell Sanyo’s refrigerator and washing machine businesses to Haier?
It is to focus their limited management resources to other businesses and markets especially emerging markets such as India and Latin America. This would enable them to strengthen product competitiveness and grow business.
Panasonic’s home appliance business for April – June was strong with operation income of 9.8% largely attributing to strong demand of energy saving products after the Japan disaster. However, to further grow their business, strengthening their overseas business in such markets as India, Latin America and Europe is a challenge they currently face.
2. What other acquisitions of Japanese companies/businesses have been made by Chinese companies?
The major ones are summarized in the chart below, followed by a brief outline of a few major M&As.
Recent acquisitions and funding of Japanese companies by Chinese companies
(Source: Nikkei, translated by the author)
Japanese Companies (business seller) / Chinese companies (acquirer or investor) / Timing of announcement / Overview of the M&A
Panasonic Haier July 2011 Acquire Sanyo’s home appliance business
Laox Suning June 2011 Raise investment ratio to make Laox its affiliate. Open new shops in Greater China
NEC Tianma Feb 2011 Acquire 70% stock of small-mid sized LCD panel business affiliate
Panasonic Hunan Corun New Energy Feb 2011 Acquire Nickel-Hydride battery business for bicycles with 500 mil yen
NEC Lenovo Group Jan 2011 Merger in PC business. Lenovo invests 50%+
Renown China Ruyi Group May 2010 Acquire 40% stocks with 4 bil yen
Ogihara BYD March 2010 Acquire factory to obtain molding technologies
Evatech A-Power Feb 2011 Acquire solar battery venture under restructuring with 4.5 bil yen
Honma Golf Marlion Holdings Acquire 50%+ stock owned by the 2 parent companies
1) Why Lenovo acquired NEC’s PC business?
After announced the M&A in January 2011, Lenovo completed acquisition of management right of NEC’s PC business in Japan, a big step forward to gain #1 market share in Japan as well as in Greater China. Lenovo aims to enhance purchasing power and reduce component cost.
2) Why BYD acquired Ogihara’s factory?
It is to expand manufacturing capacity of high quality molding of automobile bodies. Thus, BYD, a new and growing Chinese automobile company, acquired molding factory of Ogihara, a leading Japanese molding company in March 2010.
3) Why Suning made Laox one of its affiliates?
It is to absorb know how of Japanese style shop management and acquire more customers in the Chinese market leveraging Japanese brand.
3. Why have acquisition of Japanese companies by Chinese companies been increasing despite high yen?
It is, as prominent from the above cases, Chinese companies would be able to leverage leading technologies, brand and sales/distribution channel cultivated by Japanese companies, to accelerate their growth and globalization of their business.
It is case by case for Japanese companies. Japanese companies can sell businesses that have little value to them such as the case of Panasonic and Evatech, or obtain an access to Greater China market such as the case of Laox.
In addition, a Japanese M&A advisor pointed out that the mindset and attitude of Japanese companies towards M&A has been changing. He says that more Japanese executives now believe that selling their businesses of little value to them to Chinese companies would result in more growth than restructuring and integrating their domestic businesses.
Resources:-
Increasing Chinese companies have been acquiring businesses of Japanese companies to leverage technologies, brand and sales/distribution channels that Japanese companies have been cultivating for years, to boost their business globalization and worldwide business growth. Such trend is driven by the change in mindset of Japanese executives, many of whom now believe that selling their businesses with little value to them to Chinese companies would result in greater growth than restructuring and integrating the businesses.
Nikkei, Japan’s leading newspaper specialized in business and economy, reported on July 29 that more Chinese companies have been acquiring Japanese companies, taking the opportunity of reporting the announcement made by Panasonic on July 28 that refrigerator and washing machine business originally of Sanyo is to be sold to Haier, a leading Chinese consumer electronics company.
1. What is the acquisition by Haier of Panasonic’s business all about?
1) What is the overview of the acquisition?
On July 28, Sanyo reached a basic agreement with Haier to transfer stocks of 9 companies of refrigerator and washing machine business including Sanyo Aqua by the end of the year. Sanyo will also transfer home appliance businesses including air conditioners for 4 South East Asia countries including Vietnam, allowing the use of “Sanyo” brand for a few years.
The business size of the business to be acquired by Haier is approximately 70 billion yen (for 2010), engaged by 2,300 employees worldwide. The acquisition cost is not revealed but experts estimate that it is around 10 billion yen. Panasonic (Sanyo) and Haier are to reach the final agreement by the end of September.
2) Why Haier decided to acquire Sanyo’s refrigerator and washing machine business?
It is to develop high value products leveraging leading edge technologies of washing machines and refrigerators that Sanyo poses. In this way, Haier will be able to meet the needs of drastically increasing middle class in emerging countries and accelerate globalization of their businesses. Such technologies include washing clothes without water using Sanyo’s washing machines and minimizing noise during operation of Sanyo’s washing machines and refrigerators.
Haier started to globalize their business from the end of 1990s and has been expanding sales channels in the U.S., the Middle East etc. The company also had established development sites outside China to launch products meeting local needs. In addition, the company had been manufacturing locally to improve cost competitiveness to grow their business.
Today, their 1/4 of the worldwide business (1,640 billion yen in 2010) is generated from production and sales outside China. The company’s vision is to become the worldwide leader in home appliances, with their business generated from production and sales outside China reaching 1/3 of their worldwide sales.
With the acquisition, the company will be able to obtain sales/distribution channel in Japan and in some major South East Asia, a great “weapon” to achieve their vision. Sanyo had spent 40 years establishing production sites and sales channels and penetrating their brand in South East Asia. That is why recently Sanyo has been enjoying market share of 30% in washing machine and refrigerator business in Vietnam and 10% in Indonesia. In fact, 1,600 employees out of 2,300 employees that have been engaged in the businesses acquired by Haier are in Vietnam and Indonesia.
3) Why Panasonic decided to sell Sanyo’s refrigerator and washing machine businesses to Haier?
It is to focus their limited management resources to other businesses and markets especially emerging markets such as India and Latin America. This would enable them to strengthen product competitiveness and grow business.
Panasonic’s home appliance business for April – June was strong with operation income of 9.8% largely attributing to strong demand of energy saving products after the Japan disaster. However, to further grow their business, strengthening their overseas business in such markets as India, Latin America and Europe is a challenge they currently face.
2. What other acquisitions of Japanese companies/businesses have been made by Chinese companies?
The major ones are summarized in the chart below, followed by a brief outline of a few major M&As.
Recent acquisitions and funding of Japanese companies by Chinese companies
(Source: Nikkei, translated by the author)
Japanese Companies (business seller) / Chinese companies (acquirer or investor) / Timing of announcement / Overview of the M&A
Panasonic Haier July 2011 Acquire Sanyo’s home appliance business
Laox Suning June 2011 Raise investment ratio to make Laox its affiliate. Open new shops in Greater China
NEC Tianma Feb 2011 Acquire 70% stock of small-mid sized LCD panel business affiliate
Panasonic Hunan Corun New Energy Feb 2011 Acquire Nickel-Hydride battery business for bicycles with 500 mil yen
NEC Lenovo Group Jan 2011 Merger in PC business. Lenovo invests 50%+
Renown China Ruyi Group May 2010 Acquire 40% stocks with 4 bil yen
Ogihara BYD March 2010 Acquire factory to obtain molding technologies
Evatech A-Power Feb 2011 Acquire solar battery venture under restructuring with 4.5 bil yen
Honma Golf Marlion Holdings Acquire 50%+ stock owned by the 2 parent companies
1) Why Lenovo acquired NEC’s PC business?
After announced the M&A in January 2011, Lenovo completed acquisition of management right of NEC’s PC business in Japan, a big step forward to gain #1 market share in Japan as well as in Greater China. Lenovo aims to enhance purchasing power and reduce component cost.
2) Why BYD acquired Ogihara’s factory?
It is to expand manufacturing capacity of high quality molding of automobile bodies. Thus, BYD, a new and growing Chinese automobile company, acquired molding factory of Ogihara, a leading Japanese molding company in March 2010.
3) Why Suning made Laox one of its affiliates?
It is to absorb know how of Japanese style shop management and acquire more customers in the Chinese market leveraging Japanese brand.
3. Why have acquisition of Japanese companies by Chinese companies been increasing despite high yen?
It is, as prominent from the above cases, Chinese companies would be able to leverage leading technologies, brand and sales/distribution channel cultivated by Japanese companies, to accelerate their growth and globalization of their business.
It is case by case for Japanese companies. Japanese companies can sell businesses that have little value to them such as the case of Panasonic and Evatech, or obtain an access to Greater China market such as the case of Laox.
In addition, a Japanese M&A advisor pointed out that the mindset and attitude of Japanese companies towards M&A has been changing. He says that more Japanese executives now believe that selling their businesses of little value to them to Chinese companies would result in more growth than restructuring and integrating their domestic businesses.
Resources:-
Increasing Chinese companies have been acquiring businesses of Japanese companies to leverage technologies, brand and sales/distribution channels that Japanese companies have been cultivating for years, to boost their business globalization and worldwide business growth. Such trend is driven by the change in mindset of Japanese executives, many of whom now believe that selling their businesses with little value to them to Chinese companies would result in greater growth than restructuring and integrating the businesses.
2011年2月27日日曜日
Japan’s Rare Earth Metal Investment – Goodbye to Excessive China Dependence
Osaka - Sunday, February 27, 2011
Nikkei, Japan’s leading newspaper specialized in business and economy, reported on February 25 that Japan (public and private sectors) will invest total of 110 billion yen in rare earth metals in order to shed its excessive dependence on China.
The objective of the investment is to change the supply structure of rare earth metals that is highly dependent on China. This is urgent because China has been drastically limiting rare earth metal export, as mentioned in the previous article Risk Management and Interdependence in Today’s Global Economy.
The initiative will involve 160 businesses from 110 companies and the government will give financial assistance of equipment investment.
1. What is the background and objective of rare earth metal investment?
1) Shed its excessive dependence on China to reduce risk
The investment would decrease risk for Japan. In the latter half of 2010 import of rare earth metals from China once terminated. The Chinese authorities have also reduced allocation of rare earth metal export. Currently 90% of rare earth metals used in Japan are those imported from China and excessive dependence on China is a very high risk for Japan.
2) Decrease outflow of technology
The financial assistance from the government would help globally competitive manufacturing sites remain in Japan, which means decrease in outflow of technology. Chinese government has been promoting investment of Japanese component manufacturers in their country using stable supply of rare earth metals as its reason. It is because high tech components made from rare earth metals are extremely globally competitive. By providing financial assistance to Japanese component manufacturers that utilize rare earth metals, the Japanese government would like to retain such globally competitive manufacturing sites in Japan.
2. What is the overview of the initiative?
The initiative is led by METI (Ministry of Economy, Trade and Industry), which selected 160 businesses from 110 companies that align with the government’s financial assistance policy. It is decided to that total of 33.1 billion yen will be provided. 9 billion yen will be invested to seek additional businesses.
The companies are to start the investment from 2011, aiming to reduce import of rare earth metals from China by approximately 30%. Currently as much as 30,000 ton of rare earth metals from China are used in Japan, and 10,000 ton of them will be reduced in mid/long term.
3. How will rare earth metal import from China reduced?
1) Reduction in use of volume and recycling
An affiliate of Konica Minolta will implement new equipment that efficiently uses cerium oxide as glass abrasive.
Mitsubishi Trading and Dido Steel make alliance with a venture company specialized in this realm to start a new business with the objective of reducing use of dysprosium by 40% in neodymium magnets production that are used in motors of EV cars.
Hitachi Metals plans to recycle refuse of manufacturing process of neodymium magnet.
2) Diversification of supply
Rare earth metals imported from the U.S. and Australia will be used and initiatives to drive such diversification of rare earth metal supply are driven by companies.
Rare earth metals from China are usually processed as alloys before imported to Japan but the U.S. and Australia are still behind in alloy process equipment. For this reason, Mitsui Mining and Smelting and Japan Metals & Chemicals will import rare earth metals in the form of raw stone and then process as alloys in Japan. Leveraging the knowhow, the two companies also plans to implement a new equipment to extract rare earth metals Nickel-metal-hydride batteries collected from around the globe.
Rare metal import from other countries such as Vietnam and Brazil is being studied as well.
3) Examination of new components
Reduction of rare earth metals and use of rare earth metals that are different from previous ones (i.e. those imported from countries other than China) means change in constituent. This means it is quite possible that performance of motors and catalysts change.
For this reason, leading automobiles companies including Toyota, Honda and Nissan will implement equipment to examine use of such new components for EV cars as a part of their development of motors and catalysts of EV cars.
Kureha Corporate will implement testing and evaluation equipment as apart of their load material development of lithium-ion battery.
Nikkei, Japan’s leading newspaper specialized in business and economy, reported on February 25 that Japan (public and private sectors) will invest total of 110 billion yen in rare earth metals in order to shed its excessive dependence on China.
The objective of the investment is to change the supply structure of rare earth metals that is highly dependent on China. This is urgent because China has been drastically limiting rare earth metal export, as mentioned in the previous article Risk Management and Interdependence in Today’s Global Economy.
The initiative will involve 160 businesses from 110 companies and the government will give financial assistance of equipment investment.
1. What is the background and objective of rare earth metal investment?
1) Shed its excessive dependence on China to reduce risk
The investment would decrease risk for Japan. In the latter half of 2010 import of rare earth metals from China once terminated. The Chinese authorities have also reduced allocation of rare earth metal export. Currently 90% of rare earth metals used in Japan are those imported from China and excessive dependence on China is a very high risk for Japan.
2) Decrease outflow of technology
The financial assistance from the government would help globally competitive manufacturing sites remain in Japan, which means decrease in outflow of technology. Chinese government has been promoting investment of Japanese component manufacturers in their country using stable supply of rare earth metals as its reason. It is because high tech components made from rare earth metals are extremely globally competitive. By providing financial assistance to Japanese component manufacturers that utilize rare earth metals, the Japanese government would like to retain such globally competitive manufacturing sites in Japan.
2. What is the overview of the initiative?
The initiative is led by METI (Ministry of Economy, Trade and Industry), which selected 160 businesses from 110 companies that align with the government’s financial assistance policy. It is decided to that total of 33.1 billion yen will be provided. 9 billion yen will be invested to seek additional businesses.
The companies are to start the investment from 2011, aiming to reduce import of rare earth metals from China by approximately 30%. Currently as much as 30,000 ton of rare earth metals from China are used in Japan, and 10,000 ton of them will be reduced in mid/long term.
3. How will rare earth metal import from China reduced?
1) Reduction in use of volume and recycling
An affiliate of Konica Minolta will implement new equipment that efficiently uses cerium oxide as glass abrasive.
Mitsubishi Trading and Dido Steel make alliance with a venture company specialized in this realm to start a new business with the objective of reducing use of dysprosium by 40% in neodymium magnets production that are used in motors of EV cars.
Hitachi Metals plans to recycle refuse of manufacturing process of neodymium magnet.
2) Diversification of supply
Rare earth metals imported from the U.S. and Australia will be used and initiatives to drive such diversification of rare earth metal supply are driven by companies.
Rare earth metals from China are usually processed as alloys before imported to Japan but the U.S. and Australia are still behind in alloy process equipment. For this reason, Mitsui Mining and Smelting and Japan Metals & Chemicals will import rare earth metals in the form of raw stone and then process as alloys in Japan. Leveraging the knowhow, the two companies also plans to implement a new equipment to extract rare earth metals Nickel-metal-hydride batteries collected from around the globe.
Rare metal import from other countries such as Vietnam and Brazil is being studied as well.
3) Examination of new components
Reduction of rare earth metals and use of rare earth metals that are different from previous ones (i.e. those imported from countries other than China) means change in constituent. This means it is quite possible that performance of motors and catalysts change.
For this reason, leading automobiles companies including Toyota, Honda and Nissan will implement equipment to examine use of such new components for EV cars as a part of their development of motors and catalysts of EV cars.
Kureha Corporate will implement testing and evaluation equipment as apart of their load material development of lithium-ion battery.
2011年2月13日日曜日
The First Chinese Accounting Firm Enters Japan
Osaka - Sunday, February 13, 2011
Nikkei, Japan’s leading newspaper specialized in business and economy reported in its evening newspaper on February 12 that a leading Chinese Accounting Firm is to establish its first office in Japan. This is the first Chinese Accounting Firm to start business in Japan.
The firm is to support from accounting perspective Chinese companies starting business in Japan such as establishing affiliates or joint ventures in Japan. It is quite possible that the entry triggers global accounting network originating in China to expand worldwide.
1. What is the background of the first Chinese accounting firm entering Japan?
It is the fact that Chinese companies are extremely proactive in investing in Japan, especially M&A, as mentioned in the previous article Japanese Companies Leverage China / Asia Capital for Survival.
In fact, the number of M&A in Japan (acquisition of Japanese companies) by Chinese and Hong Kong companies has been increasing since 2000 and the pace has speeded up in the last year.
The number of M&A was around 10 in 2000 and has remained below 15 until 2005 but increased to above 20 in 2007. And, in 2010 the number jumped from around 25 in 2009 to over 35 in 2010.
2. Which Chinese accounting firm enters Japan?
It is Shinewing Certified Public Accountants, based in Beijing, China, that enters Japan. They have already completed registration. Japanese accounting professionals operating in China are the certified accountants.
3. What is the plan?
The company plans to officially start their business in Japan this spring, and increase the staff to approximately 10 by the end of this year.
Their core business is to support accounting and audit of affiliates and joint ventures of Chinese companies and to support M&A in Japan of Chinese companies. The company also would like to support Japanese companies investing in China.
The country manager of the Japan office commented that Japanese products are of high quality and globally competitive even though the price might be high. He also commented that Chinese companies are extremely interested in market, technology and know-how of business administration of Japan.
4. Positioning of Shinewing Certified Public Accountants
Revenue of Shinewing Certified Public Accountants is third in China, excluding western accounting firms such as PricewaterhouseCoopers. It has been supporting approximately 300 Japanese companies operating in China. It already has offices in other countries such as Australia and Singapore.
Chinese government is currently strengthening education of accountants. For this reason, they would like to expand accounting network of Chinese accounting firms by initiatives such as encouraging M&A of accounting firms/offices. The first office of in Japan is part of their initiative.
Nikkei, Japan’s leading newspaper specialized in business and economy reported in its evening newspaper on February 12 that a leading Chinese Accounting Firm is to establish its first office in Japan. This is the first Chinese Accounting Firm to start business in Japan.
The firm is to support from accounting perspective Chinese companies starting business in Japan such as establishing affiliates or joint ventures in Japan. It is quite possible that the entry triggers global accounting network originating in China to expand worldwide.
1. What is the background of the first Chinese accounting firm entering Japan?
It is the fact that Chinese companies are extremely proactive in investing in Japan, especially M&A, as mentioned in the previous article Japanese Companies Leverage China / Asia Capital for Survival.
In fact, the number of M&A in Japan (acquisition of Japanese companies) by Chinese and Hong Kong companies has been increasing since 2000 and the pace has speeded up in the last year.
The number of M&A was around 10 in 2000 and has remained below 15 until 2005 but increased to above 20 in 2007. And, in 2010 the number jumped from around 25 in 2009 to over 35 in 2010.
2. Which Chinese accounting firm enters Japan?
It is Shinewing Certified Public Accountants, based in Beijing, China, that enters Japan. They have already completed registration. Japanese accounting professionals operating in China are the certified accountants.
3. What is the plan?
The company plans to officially start their business in Japan this spring, and increase the staff to approximately 10 by the end of this year.
Their core business is to support accounting and audit of affiliates and joint ventures of Chinese companies and to support M&A in Japan of Chinese companies. The company also would like to support Japanese companies investing in China.
The country manager of the Japan office commented that Japanese products are of high quality and globally competitive even though the price might be high. He also commented that Chinese companies are extremely interested in market, technology and know-how of business administration of Japan.
4. Positioning of Shinewing Certified Public Accountants
Revenue of Shinewing Certified Public Accountants is third in China, excluding western accounting firms such as PricewaterhouseCoopers. It has been supporting approximately 300 Japanese companies operating in China. It already has offices in other countries such as Australia and Singapore.
Chinese government is currently strengthening education of accountants. For this reason, they would like to expand accounting network of Chinese accounting firms by initiatives such as encouraging M&A of accounting firms/offices. The first office of in Japan is part of their initiative.
2011年1月29日土曜日
How Successful Chinese New Year Business in Japan Be?
Osaka - Saturday, January 29, 2011
Nikkei, Japan’s leading newspaper specialized in business and economy reported today that consumer electronics mass merchandisers, retailers and tourism are preparing to boost their business by attracting Chinese tourists during the upcoming Chinese New Year, February 2-8. Consumer appetite of Chinese people living in Japan is positive but growth of business from them cannot be expected as much as last year. Chinese tourists visiting Japan, once stopped coming to Japan after Senkaku Island incident in September 2009, have been coming back. Therefore, war to attract consumers that generate high revenue is expected to be extremely fierce this year but with effective promotion can lead to success.
1. How is the recent trend of business with Chinese tourists?
Tourists from China had decreased after Senkaku Island incident in September 2010 mentioned in the previous article Risk Management and Interdependence in Today’s Global Economy but recently they have been coming back to Japan.
According to The Japan National Tourism Organization, Chinese people visiting Japan in 2010 reached 1.41 million people, which is the greatest ever with the increase by 40% from 2009. And according to Japan Department Stores Association, sales from Chinese tourists for December 2010 were +12.4% from December 2009, which was in positive after 3 months of in negative.
2. How are consumer electronics mass merchandisers and retailers preparing to attract Chinese tourists and consumers in Japan?
Examples of the promotion of major companies
(Source: Nikkei, translated and edited by the author)
Company Name / Promotion
Mitsui Fudosan / Event in 8 nationwide outlet malls in which abundant made in Japan products are displayed and sold
Huis Ten Bosch / Chinese style parades with Chinese costumes and music
Fujikyu Highland amusement park / Events for participants to experience Japanese New Year customs such as playing Japanese drums and rice-cake making
Prince Hotels / Chinese dumpling served in breakfast in all 44 nationwide hotels
9 Departments Stores in Hokkaido / Implementation of translation system (English, Chinese, Korean) on iPad
1) Consumer Electronics Mass Merchandisers
(1) Bic Camera
During a specific period, consumers can enjoy maximum of 15% discount in purchasing their consumer electronics products with coupons issued by their Chinese business partners. The discount rate is greater by 2% compared with 2010. Bic Camera hopes to attract “high revenue” customers whose average purchasing price is approximately 50,000 yen, 5 times that of Japanese customers.
(2) Laox
Laox, how a member of the Chinese consumer electronics mass merchandisers leader, recently opened their own drug store in the main store in Akihabara, an area where many consumer electronics retailers gather and many tourists from abroad shop. Col medicine, digestive medicine and dried milk, all popular among Chinese people, will be sold for cross selling.
(3) Yodobashi Camera
Multimedia Akiba, Yodobashi Camera subsidiary store close to Laox mentioned in (2), will expand duty free sales floor from January 30 until February 13. They will add products such as games and expect to increase revenue by 40% from previous year.
2) Retailers
(1) Tokyu Department Store
Department stores in Tokyo will deliver what their customers bought to hotels of the Tokyu Group in Tokyo.
(2) Matsuzakaya
A foreign currency exchange corner recently opened in Matsuzakaya in Ginza, the area where many tourists from abroad visit and shop.
3) Tourism
JTB (Japan Travel Bureau), Japan’s leader in tourism, started a free bus service until February 11 for tourists who made reservation using their web site. The busses will take tourists around shopping spots of Akihabara, Ginza and Asakusa in Tokyo.
Nikkei, Japan’s leading newspaper specialized in business and economy reported today that consumer electronics mass merchandisers, retailers and tourism are preparing to boost their business by attracting Chinese tourists during the upcoming Chinese New Year, February 2-8. Consumer appetite of Chinese people living in Japan is positive but growth of business from them cannot be expected as much as last year. Chinese tourists visiting Japan, once stopped coming to Japan after Senkaku Island incident in September 2009, have been coming back. Therefore, war to attract consumers that generate high revenue is expected to be extremely fierce this year but with effective promotion can lead to success.
1. How is the recent trend of business with Chinese tourists?
Tourists from China had decreased after Senkaku Island incident in September 2010 mentioned in the previous article Risk Management and Interdependence in Today’s Global Economy but recently they have been coming back to Japan.
According to The Japan National Tourism Organization, Chinese people visiting Japan in 2010 reached 1.41 million people, which is the greatest ever with the increase by 40% from 2009. And according to Japan Department Stores Association, sales from Chinese tourists for December 2010 were +12.4% from December 2009, which was in positive after 3 months of in negative.
2. How are consumer electronics mass merchandisers and retailers preparing to attract Chinese tourists and consumers in Japan?
Examples of the promotion of major companies
(Source: Nikkei, translated and edited by the author)
Company Name / Promotion
Mitsui Fudosan / Event in 8 nationwide outlet malls in which abundant made in Japan products are displayed and sold
Huis Ten Bosch / Chinese style parades with Chinese costumes and music
Fujikyu Highland amusement park / Events for participants to experience Japanese New Year customs such as playing Japanese drums and rice-cake making
Prince Hotels / Chinese dumpling served in breakfast in all 44 nationwide hotels
9 Departments Stores in Hokkaido / Implementation of translation system (English, Chinese, Korean) on iPad
1) Consumer Electronics Mass Merchandisers
(1) Bic Camera
During a specific period, consumers can enjoy maximum of 15% discount in purchasing their consumer electronics products with coupons issued by their Chinese business partners. The discount rate is greater by 2% compared with 2010. Bic Camera hopes to attract “high revenue” customers whose average purchasing price is approximately 50,000 yen, 5 times that of Japanese customers.
(2) Laox
Laox, how a member of the Chinese consumer electronics mass merchandisers leader, recently opened their own drug store in the main store in Akihabara, an area where many consumer electronics retailers gather and many tourists from abroad shop. Col medicine, digestive medicine and dried milk, all popular among Chinese people, will be sold for cross selling.
(3) Yodobashi Camera
Multimedia Akiba, Yodobashi Camera subsidiary store close to Laox mentioned in (2), will expand duty free sales floor from January 30 until February 13. They will add products such as games and expect to increase revenue by 40% from previous year.
2) Retailers
(1) Tokyu Department Store
Department stores in Tokyo will deliver what their customers bought to hotels of the Tokyu Group in Tokyo.
(2) Matsuzakaya
A foreign currency exchange corner recently opened in Matsuzakaya in Ginza, the area where many tourists from abroad visit and shop.
3) Tourism
JTB (Japan Travel Bureau), Japan’s leader in tourism, started a free bus service until February 11 for tourists who made reservation using their web site. The busses will take tourists around shopping spots of Akihabara, Ginza and Asakusa in Tokyo.
2010年12月12日日曜日
Japanese Companies Leverage China/Asia Capital for Survival
Osaka – Sunday, December 12, 2010
A recent article by Nikkei, Japanese newspaper specialized in business and economy, introduced an interesting way in which some Japanese companies leverage China and Asia capital to survive in the turbulent global economy.
The author feels that this can be a clue to many other Japanese companies in creating their own strategy to survive in the today’s global economy, although there is a risk of outflow of technologies. It is because this is an option of out-of-the-box thinking that is not chosen by many major Japanese companies yet this can be an extremely effective one, leveraging the strength of Japan.
1. What is the recent phenomenon in which Japanese companies leverage Asian capital? Why such phenomenon started to emerge?
1) Phenomenon
It is, so to speak, “Made in Chapan (‘China’ and ‘Japan’ coined together)”, convergence of China’s capital and Japan’s technology and brand. Asia (China) capital acquires underperforming Japanese companies, hotels, consumer electronics and apparel in particular, and creates new value and business to provide to worldwide market.
2) Background
(1) China and Asia are promising, growing markets.
(2) China in particular has abundant capital.
(3) “Made in Japan” is an excellent weapon (brand) in global business yet Japanese companies have not been able to leverage it sufficiently.
(4) Not many Japanese companies are financially capable of entering Asia/China market from scratch on their own.
2. What are concrete, successful cases of “made in Chapan”?
1) Hotel
(1) Phenomenon
Among 10 hotels/real estate etc. that needs restructuring, as many as 8 are recently acquired by China and Asia funds. Such funds calculate acquisition cost on condition that they will market go China and other Asian countries i.e. market of 1.3 billion population or more, which would be far competitive price calculated by Japanese funds that calculate their acquisition cost based on only Japan domestic market. Moreover, even if they are failing companies, they are uncut diamonds in the eyes of Chinese and other Asian funds.
(2) In the case of Chikusenso Mt. Zao Resort & Spa
Chikusenso Mt. Zao Resort & Spa, located in Zao National Park in Miyagi prefecture, that had failed due to decrease in skiers in this area in the recession, was acquired by Osbert International, based in Hong Kong. The fund invested total of more than 3 billion yen to acquire and revitalized the hotel and re-opened in April this year. The fund also made effort and succeeded to start flight (first limited time) between Hong Kong and Sendai by Hong Kong Dragon Airlines.
The main target of the luxurious resort hotel with spa is the rich people of China and other countries in Asia, whose evaluation of the Japanese culture is quite high. The concept of the hotel is “Japanese modern”, and the price is over 66,000 yen per person (twin room).
2) Consumer Electronics
(1) Phenomenon
Japanese mid-sized consumer electronics makers visit everyday a long-established consumer electronics mass merchandiser that have been in the red for years, requesting to start trading with them. This is because the long-established consumer electronics mass merchandiser has the access to the distribution channel in China.
(2) In the case of Laox Co., Ltd
Laox Co., Ltd, a long-established mass merchandiser, was acquired by a China consumer electronics mass merchandiser leader last year. This opened an access to approximately 1300 stores in China, a promising and growing market, owned by the China mass merchandiser. Since then, business partners of Laox doubled or more because the partners have requested to trade with Laox, expecting to benefit from the access to China that Laox possesses in entering the promising market of China.
For this reason, Matsuzakaya, a department store in Ginza (area in Tokyo where many department stores are located) opened a Laox franchise in their department store on November 20 this year. Matsuzakaya is said to have negotiated with other companies in opening a new franchise but chose Laox with the objectives of attracting tourists from China, in addition to competitive financial requirements presented by Laox.
3) Apparel
(1) Phenomenon
Japanese long-established apparel maker acquired by a Chinese company, and expand distribution channel in China.
(2) In the case of Renown, Inc.
Renown, Inc., a Japanese long-established apparel maker, plans to open 2000 stores in China in the next 10 years, which became feasible after being acquired by the Chinese company. The strategy of the Chinese company is to penetrate the China market with high quality product made in Japan.
For this reason, the top executive of the company says that made in Japan products are of longing of Chinese customers and therefore is determined to make all Renown products made in Japan. This is not easy because of the limited equipment/production capacities in Japan. The top executive of Renown comments that this incident is a good opportunity for them to re-acknowledge their value.
To the author, the fact that Chinese companies evaluate highly of “producing in Japan” is extremely meaningful when Japanese companies shift their production to overseas (China in particular) as mentioned in many of her previous articles including "High Yen Slashes Profitability of Japanese Companies – The Reality".
A recent article by Nikkei, Japanese newspaper specialized in business and economy, introduced an interesting way in which some Japanese companies leverage China and Asia capital to survive in the turbulent global economy.
The author feels that this can be a clue to many other Japanese companies in creating their own strategy to survive in the today’s global economy, although there is a risk of outflow of technologies. It is because this is an option of out-of-the-box thinking that is not chosen by many major Japanese companies yet this can be an extremely effective one, leveraging the strength of Japan.
1. What is the recent phenomenon in which Japanese companies leverage Asian capital? Why such phenomenon started to emerge?
1) Phenomenon
It is, so to speak, “Made in Chapan (‘China’ and ‘Japan’ coined together)”, convergence of China’s capital and Japan’s technology and brand. Asia (China) capital acquires underperforming Japanese companies, hotels, consumer electronics and apparel in particular, and creates new value and business to provide to worldwide market.
2) Background
(1) China and Asia are promising, growing markets.
(2) China in particular has abundant capital.
(3) “Made in Japan” is an excellent weapon (brand) in global business yet Japanese companies have not been able to leverage it sufficiently.
(4) Not many Japanese companies are financially capable of entering Asia/China market from scratch on their own.
2. What are concrete, successful cases of “made in Chapan”?
1) Hotel
(1) Phenomenon
Among 10 hotels/real estate etc. that needs restructuring, as many as 8 are recently acquired by China and Asia funds. Such funds calculate acquisition cost on condition that they will market go China and other Asian countries i.e. market of 1.3 billion population or more, which would be far competitive price calculated by Japanese funds that calculate their acquisition cost based on only Japan domestic market. Moreover, even if they are failing companies, they are uncut diamonds in the eyes of Chinese and other Asian funds.
(2) In the case of Chikusenso Mt. Zao Resort & Spa
Chikusenso Mt. Zao Resort & Spa, located in Zao National Park in Miyagi prefecture, that had failed due to decrease in skiers in this area in the recession, was acquired by Osbert International, based in Hong Kong. The fund invested total of more than 3 billion yen to acquire and revitalized the hotel and re-opened in April this year. The fund also made effort and succeeded to start flight (first limited time) between Hong Kong and Sendai by Hong Kong Dragon Airlines.
The main target of the luxurious resort hotel with spa is the rich people of China and other countries in Asia, whose evaluation of the Japanese culture is quite high. The concept of the hotel is “Japanese modern”, and the price is over 66,000 yen per person (twin room).
2) Consumer Electronics
(1) Phenomenon
Japanese mid-sized consumer electronics makers visit everyday a long-established consumer electronics mass merchandiser that have been in the red for years, requesting to start trading with them. This is because the long-established consumer electronics mass merchandiser has the access to the distribution channel in China.
(2) In the case of Laox Co., Ltd
Laox Co., Ltd, a long-established mass merchandiser, was acquired by a China consumer electronics mass merchandiser leader last year. This opened an access to approximately 1300 stores in China, a promising and growing market, owned by the China mass merchandiser. Since then, business partners of Laox doubled or more because the partners have requested to trade with Laox, expecting to benefit from the access to China that Laox possesses in entering the promising market of China.
For this reason, Matsuzakaya, a department store in Ginza (area in Tokyo where many department stores are located) opened a Laox franchise in their department store on November 20 this year. Matsuzakaya is said to have negotiated with other companies in opening a new franchise but chose Laox with the objectives of attracting tourists from China, in addition to competitive financial requirements presented by Laox.
3) Apparel
(1) Phenomenon
Japanese long-established apparel maker acquired by a Chinese company, and expand distribution channel in China.
(2) In the case of Renown, Inc.
Renown, Inc., a Japanese long-established apparel maker, plans to open 2000 stores in China in the next 10 years, which became feasible after being acquired by the Chinese company. The strategy of the Chinese company is to penetrate the China market with high quality product made in Japan.
For this reason, the top executive of the company says that made in Japan products are of longing of Chinese customers and therefore is determined to make all Renown products made in Japan. This is not easy because of the limited equipment/production capacities in Japan. The top executive of Renown comments that this incident is a good opportunity for them to re-acknowledge their value.
To the author, the fact that Chinese companies evaluate highly of “producing in Japan” is extremely meaningful when Japanese companies shift their production to overseas (China in particular) as mentioned in many of her previous articles including "High Yen Slashes Profitability of Japanese Companies – The Reality".
2010年8月14日土曜日
Japan Enters and Expands Mobile Content Business in China
Osaka – Saturday, August 14, 2010
Nikkei, Japanese newspaper specialized in business and economy, reported on August 12 in its evening paper that Japanese mobile content developers/suppliers are starting to provide contents to Chinese online customers. Since the start of “I-mode” mobile service in 1997, mobile content companies developed and provided variety of mobile contents and services and were successful
The Japanese web content companies are to leverage know-now and systems they have acquired and established through their business in Japan in expanding their business, first in China, for their further growth and sustainability.
1. What is the background of Japanese mobile content developers/suppliers entering Chinese market?
1) China’s mobile content market has an enormous potential
China has become (one of the) largest mobile phone market, and it is expected that 3G mobile phones and smart phones will drastically become popular. This means that it is quite possible for the China’s mobile content market to drastically grow, and China’s mobile content market potential is huge.
2) Japanese mobile content developers have abundant know-how
Japan is ahead of China in 3G, and mobile content developers have already been successful in their businesses in Japan. They could leverage know-how and systems they already possess in entering and penetrating Chinese mobile content market for their further growth, expanding their business globally.
3) Growth of Japan’s mobile content business slows down
Japanese mobile content companies have been successful in developing and providing such contents as fortune telling and decoration mails; however, Japan domestic market for that kind of business is no longer to growth much as it has been. Therefore, Japanese mobile content companies need to create and/or seek for other markets or start new businesses for growth and sustainability.
2. What kind of content businesses are being started in China?
1) Weather information
A mobile content company called Weathernews Inc http://weathernews.com/global.html decided to start providing mobile paid contents on weather, for China Mobile. It has already started providing mobile web service from April 2010 in which subscribers in China can participate in, and post weather information around the nation.
The company first started the service free of charge to maximize their subscribers, and after a certain period plans to upgrade the services with high added value and navigate the subscribers to continue enjoying the paid contents. This is the strategy they used in Japan and was successful.
2) Fortune telling
Another mobile content company called Zappallas http://www.zappallas.com/en/ started providing service of fortune telling by tarot reading in the end of July 2010. The company has made alliance with a Chinese motile content distributor called Vogins, and receives revenue from the online customers via mobile terminal that can use mobile web site managed by Vogins. The fee is 2 RBM (approximately 25 yen) for utilizing the service 15 times.
The top management of Zappallas comments that with slowing down growth rate of Japan domestic mobile content business it is urgent for them to start and establish new businesses. It is for this reason that the company is speeding up penetrating the Chinese mobile content market.
3) Online comics
Nihon Enterprise http://www.nihon-e.co.jp/, a Japanese printing/publishing company started providing Japanese comics on mobile to 3 mobile-server provider including China Mobile. They first plan to provide total of 50 titles such as comics on golf, and aim to expand their overseas content business, starting with China.
The company has been providing online comic contents free of charge and is to switch to paid content in the beginning of November, 2010. The company has signed with approximately 50 China local comic writers. Their China business has been in the red until the fiscal quarter ending May 2010 but hopes that in annual base it turns to black. In addition, they are thinking of providing comics by Japanese writers in the future.
Nikkei, Japanese newspaper specialized in business and economy, reported on August 12 in its evening paper that Japanese mobile content developers/suppliers are starting to provide contents to Chinese online customers. Since the start of “I-mode” mobile service in 1997, mobile content companies developed and provided variety of mobile contents and services and were successful
The Japanese web content companies are to leverage know-now and systems they have acquired and established through their business in Japan in expanding their business, first in China, for their further growth and sustainability.
1. What is the background of Japanese mobile content developers/suppliers entering Chinese market?
1) China’s mobile content market has an enormous potential
China has become (one of the) largest mobile phone market, and it is expected that 3G mobile phones and smart phones will drastically become popular. This means that it is quite possible for the China’s mobile content market to drastically grow, and China’s mobile content market potential is huge.
2) Japanese mobile content developers have abundant know-how
Japan is ahead of China in 3G, and mobile content developers have already been successful in their businesses in Japan. They could leverage know-how and systems they already possess in entering and penetrating Chinese mobile content market for their further growth, expanding their business globally.
3) Growth of Japan’s mobile content business slows down
Japanese mobile content companies have been successful in developing and providing such contents as fortune telling and decoration mails; however, Japan domestic market for that kind of business is no longer to growth much as it has been. Therefore, Japanese mobile content companies need to create and/or seek for other markets or start new businesses for growth and sustainability.
2. What kind of content businesses are being started in China?
1) Weather information
A mobile content company called Weathernews Inc http://weathernews.com/global.html decided to start providing mobile paid contents on weather, for China Mobile. It has already started providing mobile web service from April 2010 in which subscribers in China can participate in, and post weather information around the nation.
The company first started the service free of charge to maximize their subscribers, and after a certain period plans to upgrade the services with high added value and navigate the subscribers to continue enjoying the paid contents. This is the strategy they used in Japan and was successful.
2) Fortune telling
Another mobile content company called Zappallas http://www.zappallas.com/en/ started providing service of fortune telling by tarot reading in the end of July 2010. The company has made alliance with a Chinese motile content distributor called Vogins, and receives revenue from the online customers via mobile terminal that can use mobile web site managed by Vogins. The fee is 2 RBM (approximately 25 yen) for utilizing the service 15 times.
The top management of Zappallas comments that with slowing down growth rate of Japan domestic mobile content business it is urgent for them to start and establish new businesses. It is for this reason that the company is speeding up penetrating the Chinese mobile content market.
3) Online comics
Nihon Enterprise http://www.nihon-e.co.jp/, a Japanese printing/publishing company started providing Japanese comics on mobile to 3 mobile-server provider including China Mobile. They first plan to provide total of 50 titles such as comics on golf, and aim to expand their overseas content business, starting with China.
The company has been providing online comic contents free of charge and is to switch to paid content in the beginning of November, 2010. The company has signed with approximately 50 China local comic writers. Their China business has been in the red until the fiscal quarter ending May 2010 but hopes that in annual base it turns to black. In addition, they are thinking of providing comics by Japanese writers in the future.
2010年7月19日月曜日
Turning Point in Japan’s Trade with China
Osaka – Monday, July 19, 2010
Nikkei, Japanese newspaper specialized in business and economy, reported today that Japan’s trade with China is at the verge of turning point and may even abolish trade deficit with China to make it trade surplus. With low cost made in China products imported to Japan, trade deficit with China had been around 2 to 3 trillion per year since the middle of 1990s but for 2009 it has shrunk to approximately 480 billion yen.
This is because of the increase in purchasing power of China accompanied by economic growth. There are also qualitative changes in trade such as automobile trade started to drive export from Japan to China. These indicate that China is transforming from “factory of the world” to “market of the world”, and China’s presence as both production site and consumption market is drastically increasing.
If Japanese companies succeed to penetrate Chinese consumption market, it may not only contribute to abolishing trade deficit with China making it trade surplus but also to optimizing total trade imbalance.
1. What is the recent trend of Japan’s trade with China?
1) Analysis and estimation by Barclays Capital
Balance of trade with China for January – March 2010 was surplus, excluding seasonal factors, is the conclusion of their analysis. When they estimated by adding their original adjustment of seasonal factors to trade statistic data issued by Ministry of Finance, trade balance with China is 740 billion yen per year in surplus, although it had been in deficit for the past 21 years since October – December 1988.
2) Indication of data issued by Ministry of Finance, the primary source of Barclay Capital’s analysis
Data issued by Ministry of Finance also reveals changes in Japan’s trade with China. In 2009 with worldwide economy recession triggered by Lehman's fall, import from China to Japan decreased by 16% from 2008, when export to China from Japan decreased only by 4% from 2008.
There are 2 points that needs to be taken into note of. One is that China’s recovery which was earlier than developed countries minimized the trade decreased. The other is that trade of finished products such as automobile and high tech equipments increased prominently.
Percentage of export of transportation equipments (passenger cars, trucks etc.) increased by 3% from 2008 to 10.12% in 2009. This is about double from 5.15% in 2004 when it was at one of the lowest level because of local production by Japanese companies (in the midst when China was called “factory of the world”).
Similarly, for January – March 2010, export of video equipments such as video cameras were 1.6 times of January – March 2009, and export of digital cameras especially of high end products increased by approximately 80%.
2. Why Japan’s trade with China had been in deficit for a long time?
Primary reason why Japan’s trade with China had been in red for a long time is the fact that Japanese companies positioned China as production country/site instead of consumption market with its low labour cost. Japan’s key industry had been clothes until 1990s and shifted to electronics after 2000; however, their business flow had remained the same. Raw materials and components were exported to China from Japan and finished products produced were imported from China to Japan. This means that the value added in China by production equals trade deficit.
3. How has Japan’s trade with China changed (or started to change) today?
However, finished product drives export from Japan to China today. According to JANA (Japan Automobile Manufacturers Association, Inc.), approximately 96,400 cars were exported January – May 2010, which is 50% increase from January – May 2009. Passenger cars including Toyota’s LEXUS constitute approximately 89,600 of them. Japanese companies had been preserving domestic production for these kinds of high end, value-added products and Chinese consumers are aggressive in buying such products today.
This is because China’s purchasing power has been increasing with high economic growth when Japan’s purchasing power has been decreasing with low birthrate combined with aging population and low growth in average income. With disparity in economic growth of the two countries, it is quite possible that scenario of Japan’s trade with China turning from deficit to surplus becomes a reality.
4. How has China’s purchasing power been drastically increasing? How is it estimated to continue increasing and why?
Consumer spending amount of China has been drastically increasing and it is estimated be more than that of Japan in 2020. According to the white paper of international trade and industry for 2010, China’s consumer spending is only 1.53 trillion USD for 2008, which is less than that of 60% of Japan’s. However, in 2010 it is estimated to drastically increase to 5.570 billion USD, which is 3.6 times that of 2008. This is incredible because this surpasses Japan’s consumer spending which is 3.61 billion USD.
China’s consumption market is estimated to continue increasing drastically even with decrease in population similarly to Japan, supported by increase in middle income households. China’s middle income households whose annual income is between 5,000 and 35,000 USD is estimated to almost double from 500 million people in 2010 to 9700 million people in 2020.
An expert in international trade views on recent trends that seem negative factors for employers support such estimation and outlook that China’s import from Japan is likely to continue to increase. He views that the recent repeated labour disputes and increase in labour cost are in fact increase in income for employees, meaning increase in purchasing power of consumers (= employees). Therefore he concludes that exports of finished products from Japan to China would continue to increase despite decrease in total population.
5. What are upcoming challenges and risks for Japanese companies?
On-the-spot challenge and risk for Japanese companies is increase in labour cost of China, but their primary upcoming challenge would be to find new business opportunites in China. Also, in leveraging China’s internal demand, it is quite possible that local production in China becomes more active meaning stable export of raw materials and components from Japan to China is also inevitable.
Leveraging Chinese consumption market is a common challenge for all developed countries of matured economy. This means that global competitiveness and speed of Japanese companies would be vital to expand export to China. This is why a consultant of BCG (Boston Consulting Group) says that Japanese companies would not succeed entering and penetrating Chinese market unless they increase market share in China at an early stage.
On the other hand, if Japan’s trade with China becomes in surplus, it is possible that a new view in foreign currency exchange might emerge, which is a risk for Japanese companies. Developed countries that have been requesting revaluation of RMB market with the objective of taking corrective action imbalanced global economy but they may regard RMB appropriate against yen as it is.
Nikkei, Japanese newspaper specialized in business and economy, reported today that Japan’s trade with China is at the verge of turning point and may even abolish trade deficit with China to make it trade surplus. With low cost made in China products imported to Japan, trade deficit with China had been around 2 to 3 trillion per year since the middle of 1990s but for 2009 it has shrunk to approximately 480 billion yen.
This is because of the increase in purchasing power of China accompanied by economic growth. There are also qualitative changes in trade such as automobile trade started to drive export from Japan to China. These indicate that China is transforming from “factory of the world” to “market of the world”, and China’s presence as both production site and consumption market is drastically increasing.
If Japanese companies succeed to penetrate Chinese consumption market, it may not only contribute to abolishing trade deficit with China making it trade surplus but also to optimizing total trade imbalance.
1. What is the recent trend of Japan’s trade with China?
1) Analysis and estimation by Barclays Capital
Balance of trade with China for January – March 2010 was surplus, excluding seasonal factors, is the conclusion of their analysis. When they estimated by adding their original adjustment of seasonal factors to trade statistic data issued by Ministry of Finance, trade balance with China is 740 billion yen per year in surplus, although it had been in deficit for the past 21 years since October – December 1988.
2) Indication of data issued by Ministry of Finance, the primary source of Barclay Capital’s analysis
Data issued by Ministry of Finance also reveals changes in Japan’s trade with China. In 2009 with worldwide economy recession triggered by Lehman's fall, import from China to Japan decreased by 16% from 2008, when export to China from Japan decreased only by 4% from 2008.
There are 2 points that needs to be taken into note of. One is that China’s recovery which was earlier than developed countries minimized the trade decreased. The other is that trade of finished products such as automobile and high tech equipments increased prominently.
Percentage of export of transportation equipments (passenger cars, trucks etc.) increased by 3% from 2008 to 10.12% in 2009. This is about double from 5.15% in 2004 when it was at one of the lowest level because of local production by Japanese companies (in the midst when China was called “factory of the world”).
Similarly, for January – March 2010, export of video equipments such as video cameras were 1.6 times of January – March 2009, and export of digital cameras especially of high end products increased by approximately 80%.
2. Why Japan’s trade with China had been in deficit for a long time?
Primary reason why Japan’s trade with China had been in red for a long time is the fact that Japanese companies positioned China as production country/site instead of consumption market with its low labour cost. Japan’s key industry had been clothes until 1990s and shifted to electronics after 2000; however, their business flow had remained the same. Raw materials and components were exported to China from Japan and finished products produced were imported from China to Japan. This means that the value added in China by production equals trade deficit.
3. How has Japan’s trade with China changed (or started to change) today?
However, finished product drives export from Japan to China today. According to JANA (Japan Automobile Manufacturers Association, Inc.), approximately 96,400 cars were exported January – May 2010, which is 50% increase from January – May 2009. Passenger cars including Toyota’s LEXUS constitute approximately 89,600 of them. Japanese companies had been preserving domestic production for these kinds of high end, value-added products and Chinese consumers are aggressive in buying such products today.
This is because China’s purchasing power has been increasing with high economic growth when Japan’s purchasing power has been decreasing with low birthrate combined with aging population and low growth in average income. With disparity in economic growth of the two countries, it is quite possible that scenario of Japan’s trade with China turning from deficit to surplus becomes a reality.
4. How has China’s purchasing power been drastically increasing? How is it estimated to continue increasing and why?
Consumer spending amount of China has been drastically increasing and it is estimated be more than that of Japan in 2020. According to the white paper of international trade and industry for 2010, China’s consumer spending is only 1.53 trillion USD for 2008, which is less than that of 60% of Japan’s. However, in 2010 it is estimated to drastically increase to 5.570 billion USD, which is 3.6 times that of 2008. This is incredible because this surpasses Japan’s consumer spending which is 3.61 billion USD.
China’s consumption market is estimated to continue increasing drastically even with decrease in population similarly to Japan, supported by increase in middle income households. China’s middle income households whose annual income is between 5,000 and 35,000 USD is estimated to almost double from 500 million people in 2010 to 9700 million people in 2020.
An expert in international trade views on recent trends that seem negative factors for employers support such estimation and outlook that China’s import from Japan is likely to continue to increase. He views that the recent repeated labour disputes and increase in labour cost are in fact increase in income for employees, meaning increase in purchasing power of consumers (= employees). Therefore he concludes that exports of finished products from Japan to China would continue to increase despite decrease in total population.
5. What are upcoming challenges and risks for Japanese companies?
On-the-spot challenge and risk for Japanese companies is increase in labour cost of China, but their primary upcoming challenge would be to find new business opportunites in China. Also, in leveraging China’s internal demand, it is quite possible that local production in China becomes more active meaning stable export of raw materials and components from Japan to China is also inevitable.
Leveraging Chinese consumption market is a common challenge for all developed countries of matured economy. This means that global competitiveness and speed of Japanese companies would be vital to expand export to China. This is why a consultant of BCG (Boston Consulting Group) says that Japanese companies would not succeed entering and penetrating Chinese market unless they increase market share in China at an early stage.
On the other hand, if Japan’s trade with China becomes in surplus, it is possible that a new view in foreign currency exchange might emerge, which is a risk for Japanese companies. Developed countries that have been requesting revaluation of RMB market with the objective of taking corrective action imbalanced global economy but they may regard RMB appropriate against yen as it is.
2010年1月24日日曜日
China Business Drives Financial Recovery of Japanese Companies
Sunday, January 24, 2010 – Osaka, Japan
Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported on January 23 that according to the outlook of financial performance for fiscal year ending March 2010, China business is to be the driver for many automobile and machinery manufacturing companies. For Nissan and Komatsu, 40%-50% of consolidated operating profit is estimated to be generated from China business and profit by region for China is to be greater than those of developed countries. This shows that Chinese economy is driving recovery of company financial performance when demand of Japan, the U.S. and Europe continues to plunge. Having said that, some experts say that Chinese economy seems to be overheated and competition is getting more and more severe. China is a promising marketing but there are challenges/issues such as risk management and thorough cost reduction.
1. How Chinese economy has been?
Chinese economy has been revitalized with positive effect of the economy stimulation measures implemented by the Chinese government (approximately 53 trillion yen) in November 2008. Chinese economy has recovered to 2 digit growth for October – December 2009 and its presence has been enhancing in the world economy.
2. How have Japanese companies been benefiting from revitalized Chinese economy?
China has become the largest automobile market (unit base) in the world last year, and Japanese automobile companies also have been increasing their sales, in particular Nissan. Nissan was quicker than other Japanese companies in strengthening product lines of small cars and developing sales/distribution network, leading to approximately 750,000 unit sales (almost +40% from previous year) for 2009. Operating profit from China business is expected to reach 50-60 billion yen, which is almost half the consolidated operating profit. Nissan estimates to enjoy consolidated operating profit of 120 billion yen when Toyota is estimated to remain in red. Nissan is quicker in recovering its financial achievement by generating profit in growing marketing of China.
Component manufacturers are also benefitting from demand growth in China. NSK’s business in the developed countries remains in low level and is expected to generate 60% - 70% of its consolidated operating profit from China business.
Chinese Business Outlook of Japanese Automobile and Machinery Manufacturers
(Source: Nikkei, edited and translated by the author)
Company Name / Operating Profit: % of China Business / Consolidated Operating Profit (billion yen) / Vs. Previous Year / Trend of Chinese Business
Nissan / Almost 50% / 120 / Returning to black / Quick in establishing sales distribution network, leading to sales growth of almost 40% for 2009
Honda / +40% / 155 / +13% / Strong sales of Accord in cities on the coast
Komatsu / About 40% / 72 / -53% / Strong hydraulic shovel business, growth by 30%, overwhelming Japan business
Furukawa Electric / +25% / 10 / +3% / With strong infrastructure investment, high voltage cable in full production in China and increase in business growth
NSK / 60% / - 70% / 8 / -64% / Bearing business grows targeting automobile and industry machinery companies, when business in Japan, the U.S. and Europe continues to plunge
Regarding machinery manufacturers, sales of China for Komatsu and Hitachi Construction Machinery are approximately 20% of worldwide business, which is greater than Caterpillar. Reducing cost by manufacturing locally, Komatsu’s operating profit from Chinese business is almost 40% of worldwide business, and Komatsu is quicker than Caterpillar in recovering its financial performance.
More companies in other industries are benefitting from growing Chinese market. For example, Toto’s business of luxurious toilets (using luxurious materials etc.) is strong in China. Their China business is expected to be in black when Japan and other business are expected to remain in red. Operating profit from China business is to reach approximately 30%, the biggest worldwide.
3. What are the anxieties and risks of Chinese economy and business?
Chinese economy seems to be overheated, according to some experts. It is prominent that increase in export of steel material to Chinese market is contributing to consolidated financial performance for iron and steel giants. However, many of the executives in this industry are cautious, commenting that “if credit squeeze measure at to be taken (to prevent overheating), the current strong steel material market trend in China may well change”.
Honda is enjoying strong sales of Accord in China but profit of joint venture business in China is to remain the same with previous year. It is because price erosion is extreme in China, when each company strengthens production and sales organization. As proportion of Chinese business increase, necessity of risk management for business fluctuation and increase in competition in this market increases.
Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported on January 23 that according to the outlook of financial performance for fiscal year ending March 2010, China business is to be the driver for many automobile and machinery manufacturing companies. For Nissan and Komatsu, 40%-50% of consolidated operating profit is estimated to be generated from China business and profit by region for China is to be greater than those of developed countries. This shows that Chinese economy is driving recovery of company financial performance when demand of Japan, the U.S. and Europe continues to plunge. Having said that, some experts say that Chinese economy seems to be overheated and competition is getting more and more severe. China is a promising marketing but there are challenges/issues such as risk management and thorough cost reduction.
1. How Chinese economy has been?
Chinese economy has been revitalized with positive effect of the economy stimulation measures implemented by the Chinese government (approximately 53 trillion yen) in November 2008. Chinese economy has recovered to 2 digit growth for October – December 2009 and its presence has been enhancing in the world economy.
2. How have Japanese companies been benefiting from revitalized Chinese economy?
China has become the largest automobile market (unit base) in the world last year, and Japanese automobile companies also have been increasing their sales, in particular Nissan. Nissan was quicker than other Japanese companies in strengthening product lines of small cars and developing sales/distribution network, leading to approximately 750,000 unit sales (almost +40% from previous year) for 2009. Operating profit from China business is expected to reach 50-60 billion yen, which is almost half the consolidated operating profit. Nissan estimates to enjoy consolidated operating profit of 120 billion yen when Toyota is estimated to remain in red. Nissan is quicker in recovering its financial achievement by generating profit in growing marketing of China.
Component manufacturers are also benefitting from demand growth in China. NSK’s business in the developed countries remains in low level and is expected to generate 60% - 70% of its consolidated operating profit from China business.
Chinese Business Outlook of Japanese Automobile and Machinery Manufacturers
(Source: Nikkei, edited and translated by the author)
Company Name / Operating Profit: % of China Business / Consolidated Operating Profit (billion yen) / Vs. Previous Year / Trend of Chinese Business
Nissan / Almost 50% / 120 / Returning to black / Quick in establishing sales distribution network, leading to sales growth of almost 40% for 2009
Honda / +40% / 155 / +13% / Strong sales of Accord in cities on the coast
Komatsu / About 40% / 72 / -53% / Strong hydraulic shovel business, growth by 30%, overwhelming Japan business
Furukawa Electric / +25% / 10 / +3% / With strong infrastructure investment, high voltage cable in full production in China and increase in business growth
NSK / 60% / - 70% / 8 / -64% / Bearing business grows targeting automobile and industry machinery companies, when business in Japan, the U.S. and Europe continues to plunge
Regarding machinery manufacturers, sales of China for Komatsu and Hitachi Construction Machinery are approximately 20% of worldwide business, which is greater than Caterpillar. Reducing cost by manufacturing locally, Komatsu’s operating profit from Chinese business is almost 40% of worldwide business, and Komatsu is quicker than Caterpillar in recovering its financial performance.
More companies in other industries are benefitting from growing Chinese market. For example, Toto’s business of luxurious toilets (using luxurious materials etc.) is strong in China. Their China business is expected to be in black when Japan and other business are expected to remain in red. Operating profit from China business is to reach approximately 30%, the biggest worldwide.
3. What are the anxieties and risks of Chinese economy and business?
Chinese economy seems to be overheated, according to some experts. It is prominent that increase in export of steel material to Chinese market is contributing to consolidated financial performance for iron and steel giants. However, many of the executives in this industry are cautious, commenting that “if credit squeeze measure at to be taken (to prevent overheating), the current strong steel material market trend in China may well change”.
Honda is enjoying strong sales of Accord in China but profit of joint venture business in China is to remain the same with previous year. It is because price erosion is extreme in China, when each company strengthens production and sales organization. As proportion of Chinese business increase, necessity of risk management for business fluctuation and increase in competition in this market increases.
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