Odaira Namihei – Le Monde diplomatique

November 2005
China is now Japan’s leading trade partner and Chinese companies
are buying up small and medium-sized Japanese businesses in the
pursuit of technology and brand names.
BEIJING’S largest shopping centre, in the Zhongguancun
district, specialises in computer products. On 26 April this
year the atmosphere there was peculiar. Elsewhere in the
capital thousands of young people were demonstrating against
Japan and its interpretation of history (1), and calling for
a boycott of Japanese goods. But just as many were crowding
around Zhongguancun’s stands, gazing longingly at the
computers and game consoles imported from the land of the
rising sun.
Private security guards prevented the disorder outside
disturbing the faithful as they worshipped at the shrines of
Sony and Toshiba. But a few youngsters managed to slip in,
wearing T-shirts with slogans in Chinese and English:
“Boycott Japanese goods, support China”; “Fuck the Japanese,
China is strong”.
Sales staff representing IBM, whose personal computer
division had been bought by Lenovo, China’s leading PC
manufacturer, in January 2005, seemed to approve the slogans.
Some tried to use them as a pretext to interest potential
customers in their products.
“Our computers are just as good as theirs,” a salesman told a
westerner who seemed interested in the latest Sony. “Wait and
see, it’s just a matter of time until a Chinese company buys
them up. Lenovo had no problem taking over IBM.”
He may have been encouraged by the demonstrations taking
place outside and across China, but he wasn’t far from the
truth. Sony may not be under threat, but it is clear that
Chinese businesses are eyeing up Japan and its technology.
“One of their driving ambitions is to get their hands on the
production technologies for which Japanese small and medium
enterprises are famous throughout the world,” confirms Tanaka
Shigeaki, deputy director general of the Japan External Trade
This ambition worries Japanese public opinion, which is less
than delighted to see Chinese companies buying up local
businesses while Japan continues to be the main provider of
state aid to China (2), especially when China has overtaken
the United States as Japan’s leading trade partner (3).
Appropriating new technologies
It began in 2001 when Shanghai Electric, an industrial group
that already owns 300 companies and employs some 210,000
people, took over Akiyama, a small specialist printer
manufacturer. Rescued from bankruptcy and re-christened
Akiyama International, the company saw business increase
tenfold, particularly with China where the printer market was
booming. Three years later it had increased its workforce
from 79 to 160, maintained its system of seniority-based
salaries and reinstated bonuses that had been forgotten for
But although Akiyama International’s employees are happy with
their working conditions, sceptics are suspicious of Shanghai
Electric’s real motives. “China has acquired Japanese
technologies in the past,” Tanaka points out, “but they
weren’t cutting-edge. Chinese businessmen have realised that
if they want to get hold of them and develop their own
technological capacities they have to take over Japanese
companies. To avoid making waves they tend to go for failing
This strategy of infiltrating the Japanese market to secure
technological benefits is further exemplified by Shanghai
Electric’s acquisition a year ago of the machine tool pioneer
firm Ikegai, founded in 1889.
“When people talk about takeovers or acquiring a stake in a
company, they tend to think in terms of western practice
which generally involves restructuring,” points out Zhang
Chunhua, chief executive officer of Shanghai Electric’s
subsidiary SEC Japan.
“We take a different approach. Since China is a still a
developing country we prefer to concentrate on building up
commercial ties with the businesses we acquire, rather than
looking for a crude return on investment. Machine tools and
printing equipment fit perfectly into our corporate strategy,
especially since China is desperately short of these
Despite political and economic tensions between the
countries, experts expect this trend will become more
pronounced in the immediate future (4). Over the past four
years investment in Japan by Chinese firms has increased from
$260,000 to almost $100m, although this remains a drop in the
ocean compared with the billions of dollars that Daimler and
Renault have had to lay out to secure major stakes in the
firms Mitsubishi Motors and Nissan (5).
Tanaka notes how resentment of the arrival of western
investors in Japanese markets, in the mid-1990s, has now
given way to acceptance. He expects the same to happen with
Chinese investors, even if many Japanese balk at the idea
that China might one day become the dominant economic power
in Asia.
Chinese entrepreneurs, aware that an unfortunate historical
legacy and recent political difficulties have fed distrust,
are doing their best not to offend sensitivities (6). Tanaka
says: “I remember an official from the Shanghai chamber of
commerce asking members to avoid doing anything that might be
misinterpreted by the people of Japan, to allow mergers with
local companies to go as smoothly as possible.”
A difficult pill to swallow
His optimism is validated by the Chinese company Sanjiu’s
takeover of Toa Seiyaku, a middle-sized pharmaceutical
company based in Toyama on the western coast of Japan. Fierce
competition within the Japanese market meant that Toa no
longer possessed the necessary means to develop its business,
threatening its longterm survival. Its takeover by Sanjiu,
more familiar in the West under its 999 brand name, offered
it a lifeline: the Chinese giant, with its network of more
than 10,000 stores, was able to guarantee better distribution
of Toa’s products.
For the small Japanese company, too weak to crack new markets
on its own, this was a welcome opportunity. For Sanjiu, a
modest outlay secured access to a market where Chinese
remedies are popular. As a Toa executive points out: “The
Sanjiu deal is a clear demonstration that everyone can
benefit and that Chinese investment in Japan doesn’t have to
be seen as a humiliation for the Japanese.”
But this sentiment is not universally shared. Many Japanese
resent the Chinese presence. And the arrival of China’s
feared triad criminal organisations, which are buying up
property in areas of Tokyo that locals struggle to afford,
has helped reinforce prejudices.
A poll published by Yomiuri Shimbun, Japan’s leading daily
newspaper, presents a clear picture of Japanese resentment of
Chinese neighbours (7). Recent anti-Japanese demonstrations
in China no doubt confirmed their suspicions. The success of
a manga publication by Hirokane Kenshi (8), dealing with the
difficulties that Chinese and Japanese businessmen have
understanding one another, will have done nothing to change
public opinion.
Nevertheless the regional balance of power demands that the
countries move closer economically. Given their shared
history, neither can accept the other’s domination. The
danger that nationalist passions may cause long-lasting
wounds makes the development of business links all the more
“In the long term,” Tanaka concludes, “increased Chinese
investment in Japan is a good thing, since it will be in the
interest of Chinese businessmen to secure stable relations
between the countries.” Unfortunately, some of the visitors
to Beijing’s electronics marketplace don’t seem to be
listening yet.
Odaira Namihei is a journalist
(1) See Claude Leblanc, “Unfriendly neighbours”, Le Monde
diplomatique, English language edition, October 2004.
(2) According to a report in June from the Japanese ministry
of foreign affairs, Japanese aid to China has amounted to a
total of more than $28bn since it was first offered in 1979.
(3) Jetro Sensa, Jetro journal, Tokyo, May 2005.
(4) Mo Bangfu, Nichichûwa naze wakariaenainoka (Why Japan and
China are unable to understand each other), Heibonsha
Publishers, Tokyo, 2005.
(5) In 1999 Renault paid $5.4bn for a 36.8% stake in Nissan.
By March 2002 it owned 44.4% of the company.
(6) A poll published on 24 November 2004 by Zhongguo
Qingnianbao (Youth Daily), Beijing, indicated that 53.6% of
those interviewed had a high opinion of Japan.
(7) In the poll, published on 16 December 2004, 71% of those
interviewed stated that they did not trust China. Another
poll, which had been published 10 days earlier in the
conservative daily Sankei Shimbun (Tokyo) showed that more
than 57% of Japanese wanted their country to halt aid to
(8) Hirokane Kenshi’s Jomu Shima Kosaku (Shima Kosaku,
manager), has appeared every week since February in Shukan
Morning, Kodansha, Tokyo. The strip, which depicts the
difficulties experienced by a Japanese company setting up in
China, straddles reality and fiction, responding to the
developing relationship between the countries. Recent
episodes reflected the anti-Japanese demonstrations that
shook China during the spring of 2005.
Translated by Donald Hounam
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