A rising number of Japanese companies are expanding in Southeast Asia but scaling down in China as tensions escalate between Beijing and Washington, according to the Japan External Trade Organization.
Citing a JETRO survey conducted late last year, the government-backed body said in an annual trade and investment report that 41 percent of companies are considering expanding operations in Vietnam in the next three years or so, up 5.5 points from a year earlier.
The report, released on July 30, quoted the survey as saying that 36.3 percent of respondents had given a similar answer for Thailand, up 1.5 points, while 48.1 percent said they would boost business in China, down 7.3 points.
“Since 2018, an intensified confrontation between the United States and China has pushed up Japanese companies’ investment in the Association of Southeast Asian Nations,” the report said.
“The gap between the amount of (Japanese) investment to ASEAN and China expanded to ¥20.4 billion ($191 million) in 2019 from ¥10.2 billion in 2017,” it said.
ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
Signaling moves toward the reorganization of global supply chains, a maker of steel, nonferrous metal and metal parts in the Tokyo area said it had shifted some of its production in China to Thailand and switched U.S.-bound exports from China to Thailand as well.
A maker of steel and nonferrous metal in Shikoku said it is planning to shift Mexico-bound exports from China to Vietnam, according to the survey.
The survey, conducted in November and December, covered 9,975 Japanese companies with strong interest in overseas business and drew responses from 3,562, or 35.7 percent.
Meanwhile, about 80 percent of companies operating overseas forecast that sales this year will drop from the previous year due to shrinking demand from the coronavirus pandemic, the annual report said.
In Asia, 91.4 percent of Japanese companies in India, 89.4 percent in Malaysia, 88.4 percent in Thailand, 85.3 percent in the Philippines and 84.4 percent in Indonesia made such forecasts.
The pandemic has significantly reduced Japanese investment in the Asian market, as well.
In the first five months of 2020, investment in Indonesia tumbled 75 percent from the same period in the previous year, while declining 35.5 percent for ASEAN as a whole.
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