The Asian Strategy of Japanese Multinationals: Focus on China


Basic questions:

Negative evaluation of Japanese investment in China is aplenty, both within Japan and abroad. This involves the assessment that Japanese investment in China is behind not only that of U.S. and European multinational companies (MNCs) but also that of Taiwanese and Korean firms, and its performance has been inferior to the performance of U.S., European, Taiwanese, and Korean investment. It is usually pointed out that the inferior performance is due to the following factors:

a. While U.S. and European investments are mostly seeking domestic demand, Japanese investments are overwhelmingly designed to utilize China as an export platform, particularly to Japan and thus have not benefited from rapidly growing Chinese market adequately.

b. While U.S. and European MNCs are willing to transfer technology through such measures as locating R&D facilities in China, Japanese firms are reluctant to transfer technology.

c. The domestic content of Japanese production in China is much lower than that of U.S. and European production.

d. The degree of the localization of management is much lower in Japanese subsidiaries in China than that of U.S. and European subsidiaries.

Our basic questions are: first, whether these allegations are true, second, if so, what are the reasons, and third, what are areas for improvement both in management and public policies.