Survey: Japanese Firms’ Plans to Expand in China Hit Record Low as More SMEs Pull Out

According to Lianhe Zaobao citing Nikkei Asia, more Japanese small and midsize companies are pulling investment out of China amid persistent U.S.-China tensions, slower Chinese growth and risks tied to China’s Anti-Espionage Law. Data from Teikoku Databank showed about 13,000 Japanese companies were operating in China in 2024, nearly 10% fewer than the 2012 peak. A Japan External Trade Organization (JETRO) survey for fiscal 2025 of 784 Japanese companies in China found 21.3% planned to expand operations over the next one to two years, the lowest since the survey began in fiscal 2007. Another 14.4% said they planned to scale down, relocate or exit China, a record high, while 64.3% planned to maintain current operations. Quick, a Japanese business consulting firm that set up a Shanghai unit in 2003 to advise Japanese companies on China’s labor laws, said the number of Japanese firms entering China began declining around 2020. In the fiscal year ended December 2024, Quick’s revenue fell 35% year over year and it posted a loss of about CNY 470,000 (about SGD 90,000). The company exited China at the end of last year, and Chairman Ichiro Kawaguchi said the decision was correct because “various risks have become apparent.”