China’s state-led economy could put Japan firms in tight spot

With Chinese leader Xi Jinping increasingly championing the country’s state-led market economy as he consolidates his power at the just-concluded Communist Party congress, foreign companies, including Japanese companies, may face more challenges in China, such as leak fears. of technology.

Beijing’s strict “zero-COVID” policy, its quest for greater self-sufficiency in the manufacturing sector amid rivalry with the United States, and the promotion of “common prosperity” that could lead to coercive narrowing of the income gap contributed to heightening uncertainty. in doing business with China, critics say.

Chinese President Xi Jinping (front row, 5th from left) raises his hand at the closing ceremony of the 20th National Congress of the Chinese Communist Party at the Great Hall of the People in Beijing, Oct 22, 2022. (Kyodo)

In a work report to the twice-a-decade congress, where Xi secured an unprecedented five-year third term as party general secretary, he repeatedly stressed the importance of pursuing a “Chinese path to modernization” different from Western nations. and praised past achievements. , including radical antivirus measures.

During the week-long congress, China abruptly delayed the release of the July-September gross domestic product data without indicating a new release date, fueling speculation that the delay was out of political consideration as lackluster results could hurt confidence. in Xi’s leadership.

“If the GDP release has been delayed due to bad numbers, it is an outrageous act that completely ignores the market mechanism,” said Toru Nishihama, chief economist at the Dai-ichi Life Research Institute in Tokyo.

As Xi defended in his speech to congress the strict measures to contain coronavirus infections that involve imposing lockdowns in cities where outbreaks occur, Nishihama said it was clear that Beijing “will not prioritize the economy” and that the country’s adherence to politics is crucial. “a risk factor for the global economy.”

Also Read :  An Ominous Warning for California Economy – Pasadena Now

The economist pointed out that a two-month COVID lockdown in Shanghai, a commercial and financial hub of the world’s second-largest economy, earlier this year revealed the risk of disruption to the country’s supply chain in any major virus outbreak.

China’s economic growth has been slowing, with consumer spending and real estate investments hampered under the zero COVID policy, making it harder to reach its 2022 expansion target of around 5.5%. The International Monetary Fund predicted earlier this month that China will post growth of 3.2 percent this year.

Concerns have also been growing among Japanese companies, as well as other companies abroad, that they could be forced to transfer technology to China under their policy of promoting domestic production of high-tech products and barring imported items from government purchases.

The Japanese Chamber of Commerce and Industry in China has urged the Chinese government not to “discriminately treat foreign companies”, warning against its attempt to acquire advanced technologies through pressure on foreign companies to shift production to China and hunt for talent.

High-tech products include multifunction printers, of which Japanese manufacturers have a major share of the global market, and medical devices.

Under the slogan of common prosperity, which aims to correct economic inequality in the world’s most populous nation of 1.4 billion people, Beijing has tightened restrictions on the country’s profitable sectors such as the IT and financial industries.

The policy has raised concerns that innovation in China’s high-tech industry could be impeded.

“While China was becoming a leading player in the IT and digital sectors with the rapid spread of mobile payment transactions, this growth engine has lost momentum due to stricter regulations,” lamented a senior official at the electronics maker.

Also Read :  Reforms, policies over 8 years made India 5th largest economy, helped deal with Covid: PM

Richard McGregor, a senior fellow for East Asia at Australia’s Lowy Institute, said in an online lecture that Xi has “a much better view of politics than economics” and “objective reasons” for attacking some sectors.

McGregor said the Chinese leader had “little sympathy for markets” but warned that “clumsy political intervention could come at a greater cost”. Xi thinks that “the economy is the servant of state power. As long as that is the case, you will have many obstacles along the way,” he added.

At a press event on Sunday to introduce his new leadership team, Xi said China “will be steadfast in deepening general reform and opening up,” adding that Beijing “will open its doors more and more” as it “cannot develop in isolation from the world.”

Members of the new Politburo Standing Committee under Chinese President Xi Jinping (C) pose at a press conference in the Great Hall of the People on October 23, 2022, the day after the conclusion of the 20th National Congress of the Chinese Communist Party. (Kyodo) ==Kyodo

The remarks come at a time when caution has intensified over a “decoupling” in world markets amid US attempts to protect industries deemed essential to national security, including semiconductors.

Nishihama said China would maintain its openness policy by strengthening cooperation with countries that support its position and that further decoupling of the world economy would be “inevitable”.

China has deepened ties with many developing countries through its Belt and Road infrastructure initiative, which spans more than 140 countries. McGregor said Beijing may be “isolated in the Anglosphere” and in other Western countries, but that “is not really the case” across the world.

Also Read :  El Salvador’s Bukele Remains Popular Despite Bad Bitcoin Bets, Slumping Economy

Mariko Togashi, a researcher on Japanese security and defense policy at the International Institute for Strategic Studies, said at a recent press conference in Tokyo that she believes complete decoupling is impossible.

The United States has recently tightened export controls on high-end chips to China that could be used to produce advanced military systems, but Japan is “unlikely to follow exactly the same level of this restriction given its different economic exposures.” she said.

Nishihama echoed Togashi’s view, saying that Japan and China are “inseparable” economically, as Japan, facing a declining population, must enter its neighbor’s huge market and Tokyo cannot impose measures as strong as Washington’s to ensure its economic security.

In his speech to the congress, Xi pledged to make China’s supply chains more resilient and secure.

Yusaku Nishimura, a professor at Beijing University of International Business and Economics, said that China’s supply chains are integrated into global production systems, so it is impossible to establish these chains only between China and its allies.

“Globally speaking, building supply chains without China would lead to increased costs” for business activities, he said.

As for Japanese companies operating in China, Nishihama said they could face “high hurdles” with more state control under the continued leadership of Xi and the US’s decoupling attempts, but they must be prepared to face the challenges if they don’t find alternative bases in China. other places.

Related coverage:

China’s Xi starts rare third term with allies dominating leadership

Xi Jinping secures unprecedented third term as party chief in China

China’s Xi praises 10-year achievements, renews resolve for Taiwan


Leave a Reply

Your email address will not be published.