Commentary / Japan

A Chinese tailwind for Japan's economy?

by Kotaro Tamura

China has clearly begun to present big opportunities for Japan and its companies, even as they remain overwhelmed by the massive scale of the Chinese market and the progress of its business leaders and technologies.

That is what I felt through meetings with many Chinese political and economic leaders during a week visit to Shanghai, Suzhou and Hangzhou, along with Japanese businesspeople who attend an executive education project that I run at the National University of Singapore Suzhou Research Institute to assist entry into the Chinese market. The concrete points are as follows:

I felt that the posture of cooperation of big Chinese platform companies and researchers toward Japanese companies and people has substantially improved. Executives of Huawei, Alibaba, UCloud and other enterprises gave candid explanations of their strategies and technologies, and enthusiastically talked about how they would welcome future cooperation with Japanese firms. Leading researchers from the Chinese government and political and economy fields highlighted the challenges that the Chinese market faces and problems of Chinese firms — and discussed how Japanese companies are needed as partners that can complement them where they are weak.

The exchanges also informed us about the major changes that are expected to take place in the Chinese system. Specifically, government officials indicated that in the wake of Tesla’s entry to the Chinese market, the fields not related to national security will gradually be opened up to such firms as Google and Facebook. They also said that China’s currency exchange control will be liberalized step by step. Such a measure raises the prospect of a huge amount of Chinese money finding its way to the rest of the world, including Japan.

Outbound tourism by Chinese people has near infinite potential, and so does the impact on inbound tourism in Japan. The Japanese government has set ambitious targets for increasing the number of inbound tourists. Having experienced in China the Chinese tourists’ shift toward high-end services, however, I am convinced that Chinese travelers’ rising consumption multiplied by their growing numbers will create an enormous scale of high-end tourism demand that Japan could not have imagined in the past. The luxury Chinese hotels and restaurants that we used during the visit — with their interior decorations, atmospheric sense and materials — already surpass the level of what we see as high-end services in Japan today. Japan needs to act promptly to build up a new, high-end tourism business tailored to wealthy Chinese consumers.

Behind these developments is the changing position of the Chinese government, which has reversed its previous chilly attitude and now favors better relations with Japan as China has grown fairly isolated in its trade war with the United States. China used to think that technology imports from Germany, Israel and Taiwan would suffice. But Japan’s technologies are up a notch, and China is now newly aware that Japanese technologies, services and management know-how are more refined than those of the others and necessary for it to achieve a further evolution of Chinese technology and business.

Beijing also began to think that China’s rise as a country more open to the rest of the world and ready to cooperate with other nations is indispensable to shed the sense of caution held not just by the U.S. but the entire world.

Tokyo has also begun to veer toward hedging on the Chinese economy — as Japan’s own economy suffers from its aging and shrinking population — while getting confirmation from the U.S. government for such moves. Japan-China cooperation will also exert positive, constructive pressure on the U.S. to contain its “America First” impulses and contribute more to building a global order.

What’s needed hereafter will be further mutual understanding between Japan and China. While China, which is eager to learn from and curious about other countries, is ready to learn from Japan, many in Japan lack not only an understanding of China but the will to understand China. Some Japanese business leaders still instinctively hold a stereotypical view of China. From now, the Japanese will divide into two groups: those who seize the chance by learning from their neighbor with sincerity, and those who cling to the stereotypes and go down the path of decline. I cannot be too happy if I can assist people who try to seize a chance and thus contribute to boosting Japan’s economy through closer cooperation with China and leading China-U.S. ties in a better direction.

Kotaro Tamura, a former Upper House member and parliamentary secretary in charge of economic and fiscal policy, is an Asia fellow at the Milken Institute and serves as an adjunct professor at National University of Singapore.