However, in 2022, ongoing effort by Japanese companies to locate their manufacturing capacities outside China gained momentum as 135 companies have either left the Chinese shore or are on the verge of relocating them outside the Middle Kingdom.
Companies from Japan, the United States and other nations are accelerating their moves to shift production out of China, to lessen the risk of disruption in their supply chains due to abrupt changes in Chinese government policy and turmoil following the spread of COVID-19.
While Japan has historically invested heavily in China, current conditions have necessitated change. Japanese businesses have suffered immense losses in China, particularly during the COVID-19 pandemic, when lockdown measures resulted in devastating setbacks for companies like Toyota and Honda.
China has been the factory of the world for over four decades. But now, companies are now reassessing their reliance on the country. Apple, chip-giant TSMC, and Mazda are diversifying their supply chains out of China.
China's ruling Communist Party has attempted to increase interest in the world's second-largest economy since the end of restrictions linked to the COVID-19 pandemic. But many companies are reconsidering their Chinese operations because of new security controls and other business environment policies.
One in 10 companies in the European Chamber survey said they have shifted investments out of China. Another 1 in 5 are delaying or considering shifting investments. In aviation and aerospace, 1 in 5 companies plan no future investment in China.
The company has discussed moving the majority of aluminum iPhone production out of China. It has relocated a top iPhone enclosure-quality executive to the India operations after 15 years in China.
In this regard, India is emerging as a perfect replacement to China as the global manufacturing hub for the West. India and Vietnam both have been emerging as potential alternatives to China as global manufacturing hubs.
However, when asked if they planned to withdraw from China, as many as 74% of the American companies said they would not consider relocating manufacturing or sourcing outside China, compared with 12% who had begun moving their businesses out of China, and another 12% who remained on the fence.
Restaurant brands like KFC, McDonald's, and Starbucks have been expanding rapidly in China. Some companies, such as AT&T and GE, have been in China for 20 or 30 years. Walmart, Target, and other large retailers now have a presence in China.
The enmity between these two countries emanated from the history of the Japanese war and the imperialism and maritime disputes in the East China Sea. Thus, although these two nations are close business partners, there is an undercurrent of tension, which leaders of both sides are trying to quell.
Miniso has been criticized as a "copycat" for sharing an aesthetic similarity to Japanese variety stores such as Uniqlo, Muji and Daiso, as well as for being a Chinese retailer that markets itself as Japanese.
In separate statements issued Friday, China Life Insurance, PetroChina, Sinopec, Aluminum Corporation of China and Sinopec Shanghai Petrochemical said they had notified the NYSE and applied for “voluntary delisting.”
If Japan's exports to China were halted, its economic size would shrink by $190 billion, or 3.7% of its GDP. Europe would lose 2.1% of its GDP, while the U.S. would take a 1.3% hit. If Japanese, U.S. and European trade with China were all disrupted, a total of $1.91 trillion in added value would evaporate.
Top Japanese multinational companies including Toyota, Honda, Nissan, Mazda, Suzuki, Kawasaki, Mitsubishi, Toshiba, Hitachi, Sony, Nikon, Canon, and Pioneer have their bases in China, as per The Singapore Post.
China and Japan are the largest foreign investors in American government debt. Together they own $2 trillion — more than a quarter — of the $7.6 trillion in US Treasury securities held by foreign countries.
Nike Inc (NYSE: NKE) said it plans to halt production at three shoe factories in China and one in Vietnam to reduce output and streamline its supply chain as a result of declining consumer demand. According to a Reuters report, Nike might also pull apparel orders from other factories around the world.
Linked here is table of Chinese companies listed on the New York Stock Exchange, NASDAQ, and NYSE American, the three largest U.S. exchanges. As of January 9, 2023, there were 252 Chinese companies listed on these U.S. exchanges with a total market capitalization of $1.03 trillion.
What Happens If China Stopped Exporting? By cutting back on China-made products, raw materials could be greatly reduced . The result of that event will be a commodities market crash, which may crash all financial markets that will plunge the world into a global financial crisis almost impossible to recover from.
In addition to its low labor costs, China has become known as "the world's factory" because of its strong business ecosystem, lack of regulatory compliance, low taxes and duties, and competitive currency practices.
As Ties to China Turn Toxic, Even Chinese Companies Are Breaking Them. Companies are moving headquarters and factories outside the country and cleaving off their Chinese businesses. It's not clear the strategy will work.
Samsung's Strategic Move
By 2019, the South Korean tech giant had completely shut down its phone factories in China, while also significantly reducing its workforce in the country.
“We are concerned about reports of forced labor in, and connected to, the Xinjiang Uyghur Autonomous Region (XUAR),” Nike said in a statement. “Nike does not source products from the XUAR and we have confirmed with our contract suppliers that they are not using textiles or spun yarn from the region.”
Among them is Xiaomi, a Chinese maker whose eponymous Xiaomi 13 and Xiaomi 13 Pro models are said to be on par with an iPhone. Moreover, its prices are roughly the same as Apple's.