Last spring, Toshiba Corp. stopped making television sets in Japan,
turning to its factories in China to supply the home market. Soon after,
Minolta Co. announced that it was phasing out camera production in Japan
and would import from Shanghai instead.
Just last month, like falling dominoes, several other Japanese
manufacturers announced plans to import bicycles, motorcycles, buses and
cell phones from their Chinese factories.
"We look at China as the most important growth market," said Yukio
Shotoku, overseas managing director for Matsushita Electric Works Ltd. His
company is closing 11 factories and pushing 8,000 workers into early
retirement in Japan, whose labor costs he described as "the biggest headache."
With China, a new member of the World Trade Organization, flexing its
economic muscles, many Japanese fear they are becoming a flabby
middle-aged power with a gridlocked political system unable to meet
China's challenge.
Placing the ancient rivalry between East Asia's two great nations under a
new lens, Japan now sees itself as the world's highest-wage economy, but
separated only two days by cargo freighter from a massive low-wage economy.
"How to deal with China as a big economic power - that is the largest
issue facing Japan in the first half of the 21st century," said Yukihiko
Ikeda, a Japanese lawmaker.
....
The same way the opportunities opened up by developing American industry
threw 19th century European economies into turmoil, analysts in Japan
argue, the expansion of Chinese industry will be the defining new factor
for 21st century Asia.
Indeed, the relationship between the two countries illustrates Japan's
transformation from an industrial economy to an investor economy. This
year, Japan expects to record its first deficit in trade with China,
including Hong Kong. But that deficit will be overshadowed by the
spectacular jump in Japanese trade and investment in China.
In the last decade, Japanese investment in China has doubled, to the point
where more than half of China-Japan trade is conducted among Japanese
companies. At the same time, Japan's trade with China, including Hong
Kong, more than tripled, to $115 billion last year. But with Japan's
prospects looking somber for coming years and with unemployment at 5.3
percent, a postwar high, China makes a good scapegoat.
......
China is luring away billions of dollars' worth of Japanese investment,
the argument goes, contributing to a 20 percent drop in Japanese factory
employment during the 1990s.
The Japanese, justifiably or not, feel helpless against Chinese wage rates
that are 5 percent of Japanese levels.
Adding to Japan's despair, China is quickly moving past bicycles and basic
TV sets into the same high-technology, high-value products where Japan has
long staked its claims. This year, for the first time, "machinery"
displaced textiles as the leading sector of Chinese products imported by Japan.
....
While much of Japanese trade bureaucracy was laboring on these issues,
China was successfully lining up support from the 10 nations of Southeast
Asia to form a regional free-trade association of 1.8 billion people.
But for all their fear of China's growing economic power, the Japanese are
increasingly attracted to it as well.