The 14th GISPRI Symposium
"How to build a new Japan-China economic relationship"
On February 5, 2004, Thursday, GISPRI held the captioned
Symposium at the International Conference Hall (11th Fl. Keidanren Kaikan
Ote-Machi, Chiyoda-Ku, Tokyo), with the support of the Ministry of Economy,
Trade and Industry, Nippon Keidanren, and Japan-China Economic Association.
Opened with the special lecture given by the Honorable Wu Dawei, Chinese
Ambassador to Japan, the Symposium featured two sessions with five panelists
each. Stated below is the outline of the proceedings.
|| Special Lecture: "Current
Chinese economy and society and their prospects for the
The Honorable Wu Dawei, Chinese Ambassador to Japan
Since the policies to reform and
opening to the outside world were introduced in 1978, China
has achieved outstanding progress in the development of
a modernized society, maintained sustainable economic development,
and improved social productivity and gross national power.
Today, China has completed its initial phase of developing
a socialist market economy system, while introducing the
various forms of property ownerships, and firmly establishing
an economy opening to the outside world. Its economy has
seen significant improvement in both the quality and profitability.
Its economic growth rate is 9.1 %, GDP is 1.4 trillion
dollars (about 150 trillion yen, which is the 6th in the
world), gross import/export amount is 851.2 billion dollars
(5th in the world), and foreign exchange reserve is 403.3 billion
dollars (2nd in the world). China is number one in the
world for the production of coal, iron and steel, color
TVs, and cement. Three mega-projects (the Western China
project: electric power supply to the Eastern China; another
Western China project: natural gas supply to the Eastern
China, and the Southern China project: water supply to
the Northern China) have been fully introduced, and smoothly
The Chinese standard of living has experienced significant
leap from the hardship living with clothing and food issues
to the lives of greater affordability and affluence. Especially
apparent is the improvement in their income level, life expectancy, education
quality, material life and cultural life, as the per capita
GDP exceeded 1,000 US$. The consumption structure was
shifted from the want of clothing and foods to the pursuance
of better housing and transport conditions. The growths are especially significant
in speedway construction, cellular phones, Internet, passenger
cars, home ownerships, and oversea travels.
On the other hand, some problems are becoming apparent
such as: the stagnant growth of farmers' income adding
greater pressure for urban employment; overheated economic
development of certain regions and industries making regional
development off balance; prominence of paradoxes in resource
bottlenecks; and the realization of environmental issues.
To solve this problems, China has no choice but to rely on
the further progress in reform and development and recently launched
the concept of sustainable development to harmonize all
aspects of development. The center pillars of this concept
are to stabilize, and properly coordinate policies, to
integrate plans and programs; and to aim for the balanced
development with consideration for all. To be specific, the
concept calls for the improvement in the current dual social
structure of urban and rural areas, better coordination among
the Eastern, Central, and Western China, social progress
and full development of human resources, harmonization
between economic surroundings and resource environment,
and the greater utilization of both domestic and international
resources and markets.
The 16th Conference of the Chinese Communist Party adopted
the "Grand Blue-print for fully developing an affluent
society." The aim is to quadruple the GDP from 2000 level
to reach 4 trillion dollars by year 2020 with per capita GDP exceeding 3,000$.
Based on the Deng Xiaoping Theory and three representative
concepts, China shall resolutely promote the reform and
opening policy with a focus on its economic development,
sustain its policy on scientific advancement, and develop
socialist market economy, socialist democracy, and advanced
socialist culture, thereby promoting the overall development
of economy, society and people.
In view of how much China achieved for the past 25 years,
there is no doubt that it can attain the goal of fully
developed prosperous society, in the end. The development
of China will not only contribute to the peace and prosperity
of the World, but also provide a new platform for international
funds to take an active role. The viewpoint that China's
ever-continuing development is one of driving forces to
move the world economy is correct. The broadening of a
market and increase in business opportunities brought
by the Chinese economic growth assuredly lead to developmental
opportunities and actual benefits for Asia and the World. I
fully believe that China can contribute anew for the peace
and the development of the World as well as the further
development of Asia.
The Yen loans from the Government of Japan played an
important role in the modernization of China. The trade
amount between two countries reached the highest level
last year at 133.5 billion $. For China, Japan has been
the largest trade partner for 11 years in a row. It is
my sincere hope that the economic cooperation and exchanges
between China and Japan will expand further in the future
and bring more happiness to the people of both nations.
1st Session "Economic development of China and the future
of Japan and Asia"
||Dr. C. H. Kwan, Senior Fellow,
Research Institute of Economy, Trade
||Mr.Shinji Fukukawa, Senior
Advisor, Dentsu Inc.
||Dr. C. H. Kwan, Senior Fellow,
Research Institute of Economy, Trade
||Prof. Fukunari Kimura, Faculty
of Economics, Keio University
||Dr.Toshiya Tsugami, Senior
Fellow, Research Institute of Economy,
Trade and Industry
||Mr.Yasushi Harada, Comprehensive
Policy Researcher, Economic and
Social Research Institute, Cabinet Office, Government
|Dr. C. H. Kwa
||Prof. Fukunari Kimura
[Issues presented by Dr. Kwan]
- The rise of China does not
necessarily mean a challenge for Japan but actually
an opportunity. Currently, the view of China as threats
has been shifted to China as a driving force. Japan-China
relationship is not the relationship of competition
but that of mutual complement, in other words, the
win-win relationship. The complementary relationship
is where "China's strength is Japan's weakness and
Japan's strength is China's weakness." The share of
US market, in which Japan competes with China, is about
20%. For Japan, the business opportunities lay where
the Japanese products are stronger (such as R&D,
major part manufacturing, distribution, brand-image products,
- Why Japanese automobile industry
relocates its production sites to China? Originally,
it will be ideal to manufacture automobiles in Japan
and export them to China, but there still exists the
barrier of 25% tariff on automobile imports. What Japan
needs is to enter FTA with China as soon as possible.
This will be useful as a measure to prevent the hollowing
of manufacturing industry, as well.
concernings risks include exchange
rate adjustment, the possible appreciation of Chinese Yuan
(Renminbi), risks due to the cycle of economy, the
possibility of inflation originated from China, and
the overheating of economy.
- The inflating foreign exchange
reserve of China will better be used for building national
economy rather than to buy US bonds.
- In the 80% of the market,
where Japan is not competing with China, the appreciation
of Chinese Yuan does not necessarily mean good news,
as it is better to have lower prices for Chinese products.
Those benefiting from the Yuan appreciation will be
only those 20% of the market in competition with Chinese
- The inflation rate in China
is steadily increasing (3%), and the Chinese authorities
are shifting toward tighter price policies. In the
future, Chinese economy is likely to make a soft-landing.
above items raised by Mr. Kan, three panelists
- [In regards to the argument
on the advantages of wage level gap,] It should be
noted that the merits of transferring into China do
not necessarily rest on the wage differences but also
on the "service-link costs" (transportation fee, communication
fee, etc) and the "aggregate benefits" (presence or
absence of business partners). In case of direct investment
into China, one must consider the "aggregate benefits"
as well as "scale economy." Before considering
relocation, it is necessary to make an earnest review on
the distribution of roles between Japan and China.
- [In regards to FTA with China]
Theoretically, the case of automobile industry is as
discussed above, but, the issue is not that simple.
Rather than the simple discussion on the tariff reduction,
it is necessary to discuss the
problem on how to let China improve its domestic policy-making
environment. For this, the keys are what contents
should be incorporated into FTA, and how to let China
work on these contents. It is a tacit agreement between
two countries to aim for the economic integration
of the East Asia as a whole. Japan's role is to subjectively
consider the contents of economic integration. Japan
has already started FTA negotiations with Korea, Thailand,
Philippines, and Malaysia. The key points are what kind
of contents should be incorporated to build more favorable
business environment, and how to modify the domestic
policies of each country. Japan should develop a prototype
of FTA through negotiation with Korea and ASEAN countries,
and then envisage the FTA negotiation with China.
Hasty decision should be avoided. The partner countries
of ongoing FTA negotiation are five nations including
Mexico, and a few of them are likely to reach practical
agreements within this year. In case of FTA negotiation
with China, the timing to review the possibility may
arrive about two to three years from now, if not later.
At that point, there should be a discussion on whether
China would be really ready to follow the steps of
- We have indeed entered the
era of feeling complimentary relationship with China.
Japanese exports to China and Chinese GDP already showed
significant increases. Sooner or later, China is likely
to surpass Japan in GDP amounts.
- As the risks in this rapidly
growing China, there are "regional gaps" and "the
disparity in wealth," but Chinese authorities have
rightly responded to the corrections of these issues,
so there seems no need for any anxieties.
- One of the defining issues
for China's success or failure in the future would
be the issue of "population movements." China unified
their dual registry system of rural and urban areas.
This may provide the merit of securing labor force
as hundreds of millions of people flow into urban areas,
but substantially affects the environmental issues,
employment/unemployment issues, and social environments,
etc. The problem is: "Whether China can duly respond
to such impacts?"
- Another problem is what will
happen to the "restrictions on resource, energy and
water." As seen in the case of iron ore price hike,
how price increases due to Chinese factors influence
domestic and international markets? It may end up being
useful for the mitigation of the North-South economic
- In regards to the Chinese
Yuan, Mr. Kang said that there might be differences
in viewpoints of politics and economics, but such
differences are natural. Whatever the issues are,
there will be winners and there will be losers. The
problem is how to provide for the victims in the dark.
In fact, this may be the major and fundamental issues
- I agree that Japan and China
are in a win-win relationship, i.e. complimentary relationship
rather than competitive relationship. Moreover, I
do not believe that there will be any one big event
to overturn this complimentary relationship to a competitive
- It seems that China's foreign
currency reserve of 400 billion dollars, which is equivalent
to about one third of 1.4 trillion dollars GDP, is
too big. Their situation closely resembles that of
Japan right before the Oil Crisis, which led to the
appreciation of Yen. Moreover, to lend such huge foreign
currency reserve to the US at lower interest rate
of 1-2 % is a great loss for China, which maintains
higher economic growth rate of 9%. If China is to invest
these funds domestically, they must be able to achieve
even higher growth.
- I hope that China will not
repeat the mistake of Japan in the Yen appreciation.
China is likely to make a soft-landing, but they need
to study more from the cases of Japan's past mistakes.
- It seems all four panelists
agree that Japan and China are on the win-win relationship.
Now, we would like to focus our discussion on three
issues as the keys for the projection of Chinese economy
in the future: "overheated economy"; "Yuan appreciation"
|| We cannot debate solely on economic
indices such as price index, money supply, etc., but the
Chinese economy is definitely not overheated.
|| I believe it was somewhat overheated
until the end of last year. Recently, however, they start
to have practical tightening policies. The growth rate
of 9.1% may actually be higher, so there is really a need
to introduce the tightening policy.
|| The problem is in employment,
in other words, the issue related to the population shift
between the regions within China. In addition, the bottlenecks
in various resources may lead to disorder.
|| The appreciation of Yuan can
be a measure to cool down the overheated economy. What
I worry is the fact that the increase in bank loans to
reduce the banks' bad debts ratio seem to flow into the
real estate markets. Investment is the driving force of
Chinese economy now, but they need to shift it to consumption.
Their current consumption structure is distorted with only
expensive items showing stronger sales, which reflect the
uneven distribution of wealth resulted from the privatization
of state-owned companies.
|2. Yuan appreciation issue
|| Even if Yuan is to be appreciated,
its impact on the balance of international accounts may
be less than expected. In terms of Chinese export pattern,
we find a shift from textile and clothing to machineries.
These commodities have prices fixed on US dollars, so Yuan
appreciation will not undermine their export competitiveness.
Thorough review will be needed on this issue.
|| Yuan appreciation is not likely
to improve the current balance. It is better to use the
foreign exchange reserve to invest domestically rather
than to invest on lower return bonds.
|| Real economy and finance/currency
are two sides of the same coin. The issue of their currency
should be addressed under the concept of regional integration
and linkage along with the integration of real economy.
|| In a long term, it may be possible
to think about one unified currency for Asia, but at present
the gaps between Asian countries are wide in their developmental
phases and industrial structures, so Asia region as a whole
does not certainly come up to the required condition for
creating the optimum currency sphere. For the short term,
managed currency floatation system and the BBC method (band,
basket, and crawling) may be better. Yuan is about 15-20%
undervalued now, so it is better to appreciate Yuan gradually
in the expanse of several years. China eventually needs
to consider the liberalization of capital, but there is
no need to hurry.
|Order of concluding FTAs can be:
- With Mexico, the FTA negotiation
is in its final stage, and likely to get a breakthrough.
- In case of Philippines and Malaysia,
to reach actual agreement within this year or early next
year will be sufficient.
- With Korea, the negotiation is rather
difficult. The current situation calls for the gradual advancement
of negotiation and the development of details through mutual
consent over the entire year of 2005.
- The future discussion will involve
whether to broaden FTA to the East Asia as a whole, or with
ASEAN, and whether to envisage the involvement of China.
For the next one or two years, however, Japan and China are
not likely to be ready for such discussion.
- Removal of tariff is essential.
Developing countries need to develop own industry by replacing
imports, so cross-border efficiency improvement is wanted.
Such are the cases for automobiles, home appliances, petrochemicals,
iron and steel, and other industries.
- On the other hand, East Asia has
developed international production/distribution network already,
and become more export-oriented, so FTA for tariff removal
alone will not be sufficient. The FTAs for this region need
to incorporate the facilitation of trade and investment
(including rules on investment), development of systems
for intellectual property rights and standardization, introduction
of dispute settlement procedures (especially for in-depth
issues between private companies and states), and economic
- With China, the potential contents
of FTA include tariff removal and resolution for agricultural
issues to be implemented over the span of ten years or so.
As there are various contents and issues to be discussed
for FTA with China, it will be desirable to incorporate above
to help improve policy-making environment in China.
|On the agricultural issue:
- The protection of domestic agriculture
is what every country does. It may be better to resolve the
issue by "protecting agriculture by the means of income compensation."
- If a country is to launch some kind
of basic guideline at first by the political leadership,
it may facilitate the eventual resolution of this issue,
while providing better impression to others.
[Q&A from the floor]
- Upon the review of FTA between Japan
and China, the main stream of thoughts is certainly the tariff
removal, but tariff issue has lost its importance significantly
during the past 20 years. In this new era, it is a mistake
to focus only on tariff issue. For example, won't there
be anything to do for "the migration of population"? For
example to change visa policy drastically.
- In addition, the "issue of capital
flow" finds more restrictions than trade. We must consider,
for example, investing Japanese welfare funds in China to
get better return.
There may not be sufficient efforts or attitudes to go
and get merits in China, rather than to expect and receive
some merits from China. For example, Japan needs to exert
more efforts to recruit Chinese tourists to Japan. Without
serious and disparate efforts to earn as many merits as
possible, the balance book as a whole will go into the red.
||Mr. Taniguchi, President of the
Comprehensive Research Institute on Modern Chinese Studies,
I think that both China and Japan find
insufficient understanding among young students. What
should we do? Also, at the Special Summit Meeting of
Japan and ASEAN, Japan approaches ASEAN countries, but
ignores China and Korea. China on the other hand does
whatever it wishes with ASEAN. Is this the way to be?
||Shouldn't Japan treat Chinese
students studying in Japan better? It is the failure of
Japanese diplomatic policy. Many students end up not being
able to get employment in Japanese companies, and start
work for European and American companies. Such a way will
never allow Japan to bring competent human resources together.
How to utilize those Chinese students educated in Japan,
or the NEC policy (Nippon Educated Chinese) is an important
theme for the Japanese companies' advance into China in
Insufficiency in communication may be the root of such
problem. It is the same not only between Japan and China
but also between Japan and Korea. The key is to have closer
communication at various levels. Whether China/ASEAN or
Japan/ASEAN, the contents are quite different, and both
Japan and China are well aware of what should be done.
I am optimistic.
Mr. Ohkawa, Senior Advisor, Toray Industries, Inc.
The issues of Chinese Yuan and FTA are closely related
to each other. While Yuan is maintained at the rate undervalued
by 15-20%, to let trade liberalization, which is the aim
of FTA, precede Yuan appreciation may present a problem.
Will it be acceptable to proceed with trade liberalization
under the regimes of labor distribution and complementary
relationships between two countries, without discussing
||Although FTA and currency issue
is closely related, it is technically possible to address
them separately. Real problem is not the Yuan but the transfer
of capitals. Technically it is possible to start trade
liberalization while restraining capital transfer. In
practice, however, it may certainly be a problem.
I think it is acceptable to consider adapting the two-stage
method. In the case of Japan, the so-called Nixon Shock
led to the shift toward the currency fluctuation system,
while the liberalization of capital flow somewhat lagged
behind. People here may be worrying about the issue of
remitting profits earned in China to Japan, but such remittance
is not the trade of capitals but the transaction of ordinary
expenses. As China being the country under IMF Article
8, and a member of WTO, such transactions must have considerable
freedom, and rather preferably treated, so there should
not be much complaint.
The FTAs of USA/Chile, and USA/Singapore basically prohibit
the restriction on capital movement. I understand that
there is no talk of incorporating such restriction on the
FTAs Japan plans to make.
|| Second Session "New business
models for the advancement toward Chinese market"
||Prof. Kenji Hattori, Faculty
of Modern Chinese Studies, Aichi
||Mr.Yasuhiro Goto, Columnist/Editorial
Writer, Nihon Keizai
||Mr.Taizo Kayata, Executive
Officer, President, Overseas
Marketing, Construction & Mining Equipment
Division, Komatsu Ltd.
||Dr. Jian Min Jin, Research
Fellow, Economic Research
Center, Fujitsu Research Institute
||Prof. Kenji Hattori, Faculty
of Modern Chinese Studies, Aichi
||Mr.Yoshinori Yasumi, President,
CEO, Unika Co., Ltd.
|Prof. Kenji Hattori
||Dr. Jian Min Jin
[Presenting issues (Prof.Kenji Hattori)]
- The management viewpoint
is to fill the gap between macro economy and actual
works. I would like to introduce to you the thoughts
of Japanese company people working hard at the work
- The problems in Japanese companies'
business activities in China include following three
points: (1) no feedback from the work site (importance
of work site, location, and actual commodities); (2)
no long term strategy; and (3) the lack of a stance
to address Chinese market with the full awareness of advantages and disadvantages
of own companies.
- At present the status of China
is rising as a vast market, but their companies lack
international competitiveness (industrial competitiveness,
export competitiveness, technologies, and brand images).
The pillar for China's continuous growth will be to
develop and earn independence of private entities,
on the assumption that China is to recognize private
ownerships and property rights. Economic relationship
between Japan and China has entered a new era of "competition
and coordination" from the earlier era of "stability".
Also we must consider how to respond to their change
of values from public-sector-oriented to private-sector
- There will be many business
opportunities as the Chinese market continues to expand
and become open, but the challenge for private entities
is to establish the rights of domestic sales and sales
in general, especially the right to trade. Certainly
there are many risks arisen in the process of a regime
change from controlled economy to market economy and
from closed society to an open society.
- In the environment of four
"nons" (irrational, unfair, insincere, and displeasure"
as well as anti-Japan feeling, the localization will
be the main pillar for investment strategy toward China.
To be specific, the measures will include the training
of Chinese managers, transfer of technologies (not
the second-rated technologies), fund procurement (important
to gather information), and marketing and sales (with
distict class distinctions, targetting riches, or
selling goods exclusively specialized for a specific
- Another key point is "greater
authority to a local entity". The relationship with
a parent company in Japan should be clearly identified.
For small to medium size companies, out-sourcing and
cross-industry alliance need looking into.
- In terms of time, we must
invest in China by seriously studying and focusing
on everything from people, materials, money, information
etc. for the moment, but for longer term put less
importance on strategy and resort to optimism, as
Mao Zedong said. of "heavy tactics and light strategies."
- In larger perspective, Japan
and China need to become the central force of East-Asian
Economic Community. At individual level, Japan needs
to view China in its life-size, from dynamic, three-dimensional,
and multi-layer viewpoints, with the spirit of "commerce
and money-making first and friendship second."
- It is important to tackle
Chinese market through own entities as a medium.
- The source of Chinese purchasing
power is the uneven distribution of wealth accumulated
on value-added base, among regions, people, and professions.
(Disparity between the haves and have-nots.)
- As the consumption structure
develops, the market will further expand in every field.
- Even after the Beijing Olympics
in 2008 and Shanghai Expo in 2010, China's growth will
continue though losing momentum. Important thing is
how to grasp the opportunity that exists today. It
all depends on the management's attitude.
|2. Introduction of a company and its current
- Construction machinery market
continues its course of expansion. The keywords for
business expansion are "speed" and "quality."
- The (Komatsu's) sales amount
in China is about 6% of the whole company sales. The
ratio of Chinese sales in overseas market is less than
10%. Its growth rate is 60-70%.
- Japanese shovels are superior
products and technologies in the world. Chinese market
takes up the used shovels from Japan. Japan and China
are in a complimentary relationship in terms of market,
production, and used products.
- Business of our company (Unika)
is the production of drills for concretes (hole-drilling
edged equipment). The industry is matured and started
to shrink in Japan. We concluded that advancement into
overseas markets is the only way for the company's
future growth. Taking advantage of our company's competitive
edge on "high quality" and "low price", the company
advanced into the Chinese market. What used to be important
there 10 years ago when we first entered the Chinese
market was "less cost," but now the keywords are "efficiency"
- The concept is "if you can
win the Chinese market, then you can win any other
- The sales in China shares
about 5% of the total sales. Those manufactured in
China are sold to Japan, and then to Europe and USA.
The growth rate of the Chinese market is 70%,
- The quality and technology
levels of Japanese products are superior, but they
alone may not ensure sales. (Such as the cases of Japanese
home appliances, cellular phones, etc.) The development
of products and technologies conforming to the needs
of consumers and the Chinese market as well as the
growth of a market itself can lead to business opportunities.
- Nowadays consumers do not
go for low quality inexpensive goods as they used to,
but ask for higher quality products. In this sense,
the bi-polarization of Chinese markets has begun in
both consumption and supply. In other words, Chinese
market is increasingly divided into two poles of "good
and expensive" and "affordable." In the future, the
question will be how to attack this huge market of
1.3 billion people which field to focus on, and whether
to select spreading or aggregating.
|4. Production and sales risks and countermeasures
- Production risks are not
too hard to tackle compared with those of domestic
- As long as one offers technological
cooperation, there always are risks about pirating.
Yet they can hardly copy the contents.
- Sales risks are actually the
risks on "collecting payments." Collection method is
not by cash but by "installments." As there is
a secure system to collect debts through bank loans, trading
is possible if there are information on, and proofs
of, ID cards, copies of family register, and the work
contents. We expect that there will be the development,
transparency, and disclosure of customer and credit
- Until now, we put efforts
to let consumers select Komatsu. In the future, it
will become important for us to select consumers.
- What is important in debt
collection is to manage the frontline of transaction.
All the problems we find are localized at the site
of transaction, including the moves and behavior of
consumers, and the actions of our staff, managers,
agencies, business partners etc. In this sense, risk
management is equivalent to the frontline management.
- Regarding the issue of production,
the management of production site is important in view
of quality control. Sometimes even Japanese managers
have difficulties. The biggest issues include the "education
of local managers" and "training of employees."
- Pirating of products is inevitable,
as the wants of users have been divided into "good
quality products" and "cheaper the better."
- In terms of sales, the biggest
problem is payment collection. Currently we request
cash payment, but plans to shift gradually to credit
- Generally and universally
speaking, what is important in addressing risks is
to make everything open. Another important thing is
to pressure administrative organizations rather than
to threaten or to intimidate them.
- The risk issue is not the
comparison of risks between Chinese and Japanese markets,
but whether you are facing the same risk your competitors
The issues of payment collection and technology leakage
are alike. Important thing is to self-manage what is
valuable to you.
- The problem of technology
outflow is the problem of job hopping. How a Japanese
company manages and controls Chinese or Japanese people
in the Chinese market. Are you in the control of what
the technologies are and what should be protected?
- Need to build systems, regulations,
and methods for localization, risk hedging, risk management,
- It is difficult to make general
and universally applicable comment, but we need to
note that China is still a developing country, and
a country of one-party rule by the communist party.
We need to address irrational aspects under such conditions
as well as the aspects of their wish to develop markets.
- Especially the domestic sales
issue is a big problem. To be partnered with a Chinese
company can be more important than than to start production
activities. While it is necessary for Japanese company
to ascertain what kind of a company is your partner,
Chinese companies are trying to place Japanese companies,
- There are three secrets of
success in China. One is to well respond to the Chinese
market through close observation and evaluation. (Sensitivity
in responding and reacting to the market formation.)
Two is to have a technology conforming to the consumer
needs (for example, not a catalogue sales but technology
development conforming to the demands of consumers).
Three is the management (basically localization of
- We provided Spartan training
for the "management education" of the local president,
while inspiring employees as a whole to have "motivation."
- In terms of alliance, we formed
one cross-industry company among small and medium companies
to enter the Chinese market. Unika has become a representative
company to manage the local company (local name: Rimao).
Each Japanese company is organized into each "division"
in order to reduce costs, improve management efficiencies,
and hedge risks by sharing certain business functions
and processing expenditures as common costs.
- The head of the local company
is Chinese. He has been trained since his joining the
company in Beijing 20 years ago. On top of training
such personnel, important thing is that he has sufficient
people to follow him. In other words, to develop an excellent individual,
and let other local Chinese people motivated to strive
on his footsteps.
- When we started to enter the
Chinese market, the situation there did not allow for
us to make alliance with other companies or entities,
but today we try to do various efforts in winning the
partnerships including the one with a university in
- The basic principle of our
company's management is to optimally and fully utilize
every resource in China (human resource, funds, know-how
etc.) Whether a plan is located in China or not, it
is necessary for the production site to do whatever
possible for winning a global competition.
[Q&A from the floor]
||(Mr. Shimano, Chief of Economic
Research Department, Okasan, Economic Institute)
What will be the impacts of Yuan appreciation
and the countermeasures to mitigate such impact?
- As our company has more imports
from China than exports to them, the Yuan appreciation
will be a plus. In terms of investment from Japan,
also, it is a plus as their values increase.
- We steadfastly make reservation
on foreign exchange rates. On another aspect, the Yuan
appreciation raises costs for the Japanese company
in China, but their asset value will increase. It depends
on how they offset each other.
- It is important to view China
through the eyes of own company or entity.
- Before judging or criticizing
China (Chinese companies), it is important to address
issues as the issues of own.
- The most important is the
localization. Localization does not necessarily mean
to use Chinese people but to use people who have a
thorough knowledge in the local market, and maintain
sales capability. No need to be Chinese. We need to
develop a market led by local markets. In such sense
it is governance. How Japanese parent companies govern
Chinese subsidiary company? How to motivate a local Chief
Financial Officer? Current evaluation system may present
problems. Make a commitment to the Chinese market, and
provide incentive mechanism. Even Japanese can be
well adapted to the job if qualified.