Corporate leader survey: Worries grow that China’s slowdown will hurt Japanese companies

Corporate leader survey: Worries grow that China's slowdown will hurt Japanese companies

TOKYO — Concern is rising in corporate Japan over the impact of the Chinese economic slowdown, a Nikkei survey of top managers at 148 major Japanese companies shows.

     The quarterly survey was taken from Sept. 2 to Sept. 24, when data revealed that the Chinese economy was clearly decelerating. A whopping 64.1% of the managers said it would have a negative impact on their companies. Only around 20% expected no impact.

     Asked to select up to two ways their companies’ fortunes would suffer from the Chinese slowdown, nearly 70% said “declining sales in China,” followed by “declining exports to China.” Roughly 20% also worried about reduced sales to Chinese tourists visiting Japan.

     On how they would cope with the slowdown, a plurality of around 40% said they would maintain current operations, while 17.9% answered that they are considering reducing Chinese production and 5.3% said they are looking into cutting Chinese staff.

     Some Japanese companies are already moving to adjust output. Kobe Steel unit Kobelco Construction Machinery will cut some 200 positions in China, or 10% of its workforce there, by year-end amid a cooling real estate market that has stifled demand for construction equipment. Hitachi Construction Machinery has reduced production at a factory in Anhui Province. The plant had two weeks of operating days in August, half its normal load.

     There is also caution about the state of the Japanese economy. In the June survey, 90% of respondents said the domestic economy was expanding. But in the new poll, 55.4% said it was flat. But this does not indicate growing bearishness. Some 41.9% said there were signs of improvement over the next six months, while 18.9% said the economy is improving.

     Asked to provide up to two reasons for improvement, “recovery in consumer spending” and a “recovery in capital investment” were the most-cited answers. On domestic capital investment plans for the current fiscal year, 15.6% said they would exceed the amount originally budgeted. Kawasaki Heavy Industries will spend 25 billion yen ($207 million) in Aichi Prefecture to build a parts factory for Boeing aircraft. Chemical maker Asahi Kasei will invest about 4 billion yen to increase production at a Miyazaki Prefecture site by 40%.

     It appears that an effective strategy to cope with the Chinese slowdown will be to tap solid demand in the Japanese and U.S. markets.

(Nikkei)

Corporate leader survey: Worries grow that China's slowdown will hurt Japanese companies